
Qass. 
Book 



61st Congress*! SFNATE f Document 

2d Session I I No. 582 



NATIONAL MONETARY COMMISSION 



The Origin of the National 
Banking System 



ANDREW McFARLAND DAVIS 



^e 



Washington : Government Printing Office : 1910 



61 7ASf S } SENATE { D No U l8 E 2 NT 



NATIONAL MONETARY COMMISSION 



The Origin of the National 



Banking System 






BY 



ANDREW McFARLAND DAVIS 



Washington : Government Printing Office : 1910 






\ 






XATIOXAL MONETARY COMMISSION. 



Nelson W. Aldrich, Rhode Island, Chairman. 
Edward B. Yreeland, New York, Vice-Chairman. 



Julius C. Burrows, Michigan. 
Eugene Hale, Maine. 
Philander C. Knox, Pennsylvania. 
Theodore E. Burton, Ohio. 
Henry M. Teller, Colorado. 
Hernando D. Money, Mississippi. 
Joseph W. Bailey, Texas. 



John W. Weeks, Massachusetts. 
Robert W. Bonynge, Colorado. 
Sylvester C. Smith, California. 
Lemuel P. Padgett, Tennessee. 
George F. Burgess, Texas. 
Arsene P. Pujo, Louisiana. 
Arthur B. ShelTON, Secretary. 



A. Piatt Andrew, Special Assistant to Commission. 















TABLE OF CONTENTS. 



Page. 

Preface 3 

The field of investigation 7 

Early suggestions of a national currency 9 

The circulating medium in i860 12 

Travel in the interior difficult 13 

Losses through failures 15 

Ragged and worthless bills in circulation 17 

Jay Cooke's opinion 19 

Protests of governors 20 

Fluctuations in quantity 21 

Greatest trouble in the West 22 

Counterfeits 23 

Local restriction and inspection proposed 26 

What the Treasurer could receive 28 

Mr. Chase's inaugural 30 

Government depositories 31 

Finance reports, 1861 32 

The banks suspend 33 

Marketing the bonds 34 

National banks suggested 36 

Uniform currency and bond market 37 

Congress changes its attitude 39 

Opposition of Secretary to legal tenders 42 

Mr. Chase's correspondence 44 

O. B. Potter submits a plan 45 

Numerous suggestions 49 

Pamphlet by Eleazar Lord 50 

Advice, congratulations, and criticism 50 

Treasury notes refused 54 

Potter's plan adopted 54 

Mr. Spaulding prepares a bill 55 

Mr. Hooper introduces a bill 56 

Silas M. Stillwell takes a hand 57 

Mr. Jordan prepares a bill 58 

Notes explanatory of the system 58 

The Stillwell- Jordan-Spaulding-Hooper bill 61 

Opposition of banks 62 



National Monetary Commission 



More letters of advice and sympathy 63 

Finance report, December, 1862 67 

How the report was received 69 

Mr. Chase seeks for help 71 

Preliminary discussion in the House 72 

Senator Sherman's aid solicited 75 

Mr. Sherman takes hold in earnest 77 

The debate 79 

Final debate in the House 81 

The Hooper bill and the Sherman act 82 

Taxation 83 

Sherman's changes 85 

Sections dropped and sections added 86 

The military situation influences votes 87 

Opinions after the passage of the bill 88 

Mr. Chase speaks in Ohio and in Indiana 91 

Different views as to the progress of the system 92 

Finance report, December, 1863 93 

Attack of the New York Clearing House 95 

Taxation urged 96 

Praise for Hooper and R. J. Walker 99 

An exclusive national currency 100 

A new birthday for the system 101 

Hostile taxation of state banks 102 

Mr. Chase writes W. C. Bryant 103 

The conclusions of authors 104 

The order of the motives 106 

General impression that the bond market leads 108 

The predominant motive in Mr. Chase's mind 109 

Progressive belief that the system strengthens the Union no 

Appendix A. — The Hooper bill, 1862 113 

B — The Sherman Act, 1863 155 

C. — Section 7 of "An act to provide ways and means for 
the support of the Government," approved March 

3, 1863 199 

Index 203 



PREFACE. 

Salmon Portland Chase, through whose insistence the 
national banking act was passed, was a lawyer by pro- 
fession, who had drifted into politics and had held the 
positions of governor of Ohio and of United States Sena- 
tor. In no part of his career had there been any such 
touch with financial affairs as would have justified his 
selection as Secretary of the Treasury at this critical period 
of the nation's affairs, if a supposed familiarity with 
finance had been the basis of his appointment. In the 
study of the evolution of the national banking system 
which follows, frequent quotations are made from his 
reports to Congress, and no person can read them without 
being impressed with the force of his arguments and the 
lucidity of his mode of expression. Forced by circum- 
stances to resort to Treasury notes to meet current obli- 
gations, he was following in this respect in the footsteps 
of his predecessors, who had at various times made use 
temporarily of short- time interest-bearing notes. The 
constitutionality of these emissions had been repeatedly 
questioned, but the practice, so far as it applied to inter- 
est-bearing securities in this form, was well settled. It 
was something of an innovation to emit noninterest-bear- 
ing notes which might serve as currency. Experience had 
demonstrated the danger which accompanied the emission 
by a government of notes which should serve as currency, 
and in reports made by Mr. Chase he set forth with great 
clearness the peril to the nation which accompanied his 



4 



National Monetary Commission 

action in thus availing himself of a simple and, to a cer- 
tain extent, an advantageous method of adjusting the 
government debts. Whether his knowledge of the danger 
which was inherent in this action was derived from the 
example of France in the time of Law's Mississippi Bubble; 
from the continental bills of the confederated colonies; 
from the assignats of the French Republic, or from some 
of the more modern experiences in Europe, does not 
appear. It is not probable that he could have known 
much about the experiences in the American colonies in 
the eighteenth century, which furnish an object lesson to 
economists upon this subject, but concerning the details 
of which very little was known at the time when he wrote 
these reports. One very striking argument that he makes 
shows how thoroughly he covered the ground, and an ex- 
amination of what took place in Massachusetts in the first 
half of the eighteenth century discloses that it was well 
founded. He says in his report in 1862, " A government 
issuing a credit circulation can not supply, in any given 
period, an amount of currency greater than the excess of. 
its disbursements over its receipts." He then goes on 
to say that if the receipts exceed the expenditures, 
"There is then no mode in which a currency in United 
States notes can be permanently maintained except by 
loans of them, when not required for disbursement on 
deposits of coin, or pledge of securities, or in some other 
way. This would convert the Treasury into a government 
bank, with all its hazards and mischief." 

During the emissions of bills of public credit by the 
Province of Massachusetts Bay, in the first half of the 



National Banking System 

eighteenth century, a somewhat similar condition of 
affairs prevailed. There was not, it is true, a plethora of 
receipts in the treasury, but there was a rise in prices 
owing to excessive emissions, and the reduction in the 
purchasing power of the bills resulting therefrom created 
an impression of a shortage of the circulating medium. 
To meet this, loans were resorted to, and to prevent a 
scarcity of the currency when these loans became due and 
large payments to the Government were therefore to be 
made, other loans were effected. Thus the Province was 
for many years a lender of its credit. In the technology 
of the day, these loans were termed "banks." 

With these few words of appreciation for the masterly 
treatment by Mr. Chase of the subject of a uniform 
national currency to be furnished by national banks in 
preference to the Government itself, I submit the study 
upon the subject of the evolution of the banks. 

The material upon which this research rests was col- 
lected at my request and under my supervision by 
Mr. Clyde O. Ruggles. I owe to him acknowledgment 
for the intelligent manner in which he carried out my 
instructions, following to their end on his own motion 
clews which suggested themselves to him while making 
the investigation along lines originally directed by me. 
The papers of George Harrington must have contained 
much that was of interest bearing on the questions sub- 
ject to our consideration. We have but little knowledge 
of what took place in the interviews that Mr. Chase had 
with, the bankers of New York, and to the papers of men 
in the department at that time we should naturally look 



National Monetary Commission 

for light on these hidden affairs. Mr. William K. Bixby, 
of St. Louis, has a collection of Mr. Harrington's papers, 
which he generously forwarded to me for my inspection. 
Unfortunately they contained nothing of importance on 
this subject. Searches were also made at my request at 
the Treasury Department for any papers left by either 
Harrington or Jordan. The latter search brought to 
light some papers of interest relating to the amendatory 
act, but nothing touching the original bill. 

The correspondence of Mr. Chase is scattered, and the 
gaps in the dates show that much has disappeared. What 
is left is to be found in the Pennsylvania Historical Society 
and the Library of Congress. A few official letters remain 
in the Treasury Department. Access to these papers 
has been freely granted to me. For the analysis of the 
material collated as above I alone am responsible. 

Andrew McFarland Davis. 

Cambridge, March 26, 19 10. 



THE ORIGIN OF THE NATIONAL BANKING SYSTEM. 



THE FIELD OF INVESTIGATION. 

The origin of the national banking system is probably 
to be found in the germ from which sprang the establish- 
ment, in 1838, in the State of New York, of a set of local 
banks, having the power to emit a currency secured by 
the deposit of State bonds. The success of this plan 
suggested that a uniform national currency might in the 
same way be provided through the emissions of special 
associations, which should secure their notes by the pledge 
of government securities. 

The desire to make use of the New York experience in 
national affairs must be looked for in the mental opera- 
tions of the man then in charge of the Treasury Depart- 
ment, through whose insistence it became possible to 
secure the passage, as a war measure, of the law through 
which the national banks came into being, even though 
the act did not have the hearty support of Congress. If 
we seek to trace the opinions of Salmon P. Chase on this 
subject, prior to and during the years of trial and respon- 
sibility in which the national banking system was being 
evolved, we must have recourse to his speeches, to his 
official reports, and to his correspondence. To compre- 
hend the causes which induced him to act, we must take 
into consideration the condition of the currency upon 
which our people were then dependent for a medium of 
trade. To give him full credit for his final determina- 
tion, we must examine the possible solutions of the prob- 
lem which were called to his attention and we must 
fairly consider the various plans and schemes for relief 



National Monetary Commissio 



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which were submitted to him, whether in the light of 
later experience these rejected propositions seem reason- 
able or not. We must also give due credit to the opin- 
ions of those who aided in bringing into shape the bill 
which was submitted to Congress, nor can we neglect 
the motives which influenced those who contributed 
toward securing the passage of the banking legislation 
which was finally effected, whether their efforts were put 
forth within or without that body. A review of the con- 
ditions of the times, the needs of the Government and 
the personal influences brought to bear upon the Secre- 
tary of the Treasury during the years 1861 and 1862 
will put us severally in position to determine whether we 
shall conclude that the adoption of a banking system 
similar to the one then in vogue in the State of New 
York was to be credited to the suggestion of any one per- 
son, or to the resultant pressure of circumstances guided 
and controlled by a strong will. 

We must, of course, take into account the rapidly 
changing financial condition of the country while the 
bill was under consideration, and it may appear that 
motives predominant at one stage of affairs necessarily 
became of less importance at a later period. If such 
should prove to be the case, it will help to explain why 
different writers have with apparent good reasons reached 
different conclusions as to the prevailing motive for the 
adoption of the national banking system. If we follow the 
matter to the passage of the banking act in 1864, when the 
system assumed the form which it has practically preserved 
until the present time, we shall realize that a powerful 



National Banking System 

opposition inspired timidity and retarded progress, so that 
measures essential for success were impeded until patri- 
otism rallied to their support and demanded their passage. 

EARLY SUGGESTIONS OF A NATIONAL CURRENCY. 

The first proposition on record which can be quoted as 
suggestive of a national banking system other than that 
of a central national bank was made as early as 1815. 
A Frenchman, traveling in this country from South to 
North, experienced loss and discomfort from the deprecia- 
tion of the bank notes into which he had converted his 
funds. He found that these conditions increased as he 
journeyed farther and farther from the place where 
the notes were emitted. His trials furnished the founda- 
tion for an article which was published in Philadelphia 
in the Analectic Magazine, in which article relief was 
suggested for this state of affairs, through a uniform 
currency, which might be based upon United States stocks, 
the use of which for this purpose would, as the writer of the 
article phrased it, give "a new prop to the security" of 
these stocks, by which he probably meant that their mar- 
ket value would be correspondingly increased with this 
additional use. This article was signed W., and fifty 
years later, a contributor to the Historical Magazine a 
rescued it from the oblivion of the pages of the Analec- 
tic Magazine and republished it with the comment that 
twenty-three years after its appearance, New York 
adopted the plan, and that when the national banking 
system was created, substantially the same arguments 
were used. W's proposition was that in the absence 

a Historical Magazine, August, 1865, Vol. IX, pp. 253-256. 



National Monetary Commission 

of specie the public funds might serve, "as the basis 
and support, and limit of paper currency." If the banks 
did not have coin, his idea was that they should be 
compelled to redeem their notes in Government 6 per 
cent stocks at par. This could be brought about by the 
establishment of a central national bank on this plan. 
Other banks would necessarily follow the example. 

In 1847 Millard Fillmore was elected comptroller of the 
State of New York. He had previous to this served sev- 
eral terms in Congress. During his congressional term 
the question of a national bank had come under considera- 
tion. He took no part at that time in the discussion of the 
subject, but while comptroller of the State of New York, 
he suggested in his report January 1 , 1 849 , that a national 
bank, with the stocks of the United States as the sole basis 
upon which to issue its currency, might prove a great con- 
venience to the Government with entire safety to the peo- 
ple. While this proposition apparently involved the idea 
of a secured currency to be emitted by a single central bank, 
it at any rate contemplated the use of United States bonds 
as the basis for a circulating medium. 

This fact was brought out by a contributor to the 
Bankers' Magazine in December, 1861, who signed himself 
L. Bonnefoux, and who styled himself " Originator of the 
New York State Stock Security Bank in 1838." a A second 
article by the same writer, published in February, 1862, in 
the same magazine, 6 was entitled "Outline of a plan to 
create a national currency, based on the pledge of certifi- 

« Bankers' Magazine, Vol. XI (new series), p. 417; see especially pp. 
433, 434, 443, and 450. 

& Bankers' Magazine, Vol. XI (new series), pp. 589-597. 

10 



National Banking System 

cates of a special loan issued by the United States and guar- 
anteed by a branch of the public revenue set aside as a sink- 
ing fund." The author regarded it as self-evident that the 
adoption of such a currency would render the Government 
independent of foreign capitalists. Such a national cur- 
rency would connect the people, the state banking insti- 
tutions, and the National Government in a common bond. 
This article was in the form of a letter dated Paris, No- 
vember 19, 1 861. 

February 14, 1838, some person who signed himself 
" J. B. C." printed an article on the subject of the currency 
in the New Bedford Mercury, and forwarded the same 
in the form of a circular to the leading men of the country. 
The writer knew nothing of the plan suggested in the 
Analectic Magazine. He proposed that one-fifth part 
of the capital stock of every bank should be loaned to the 
State at an interest of 6 per cent, and that every bank 
should be allowed to issue bills to the amount of the loan 
made to the State. The original article remained in com- 
parative obscurity, but in August, 1865, the author re- 
published his circular in the Historical Magazine. 

The financial experiences of 1837 disclosed the defects 
of the safety fund banking act of New York and brought 
about the passage of the free banking act in 1838. This 
introduced a new element into the banking systems of the 
country. Security for the circulation and inspection of 
the condition of the banks added greatly to the confidence 
of the community in the notes of such banks as were in- 
corporated under this system or under analogous laws, 
wherever the conditions imposed were honestly enforced. 



National Monetary Commission 

Professor Dunbar, a in one of his essays, says: "The free 
banking system with provision for a bond-secured note 
issue was followed in other States in such rapid succession 
in the later fifties as to suggest the probability that had 
not the normal course of development been interrupted 
the system might have become general." The following 
States had prior to i860 passed free banking laws: Ver- 
mont, Massachusetts, Connecticut, New Jersey, Pennsyl- 
vania, Virginia, Tennessee, Florida, Louisiana, Ohio, In- 
diana, Illinois, Wisconsin, and Iowa. 

THE CIRCULATING MEDIUM IN i860. 

The notes of the New York banks, where the provisions 
of the New York free banking act were rigidly enforced, 
were favorably received, even beyond the region where de- 
tails concerning their management were known. This 
was also true of the stronger of the Massachusetts banks 
where a system of redemption prevailed, the New England 
country banks being compelled to maintain in Boston, 
with the Suffolk Bank or the Mutual Redemption Bank, a 
deposit for that purpose, which deposit was counted in 
their reserves in the statements that they were required 
by law to furnish. The strong banks of the East were the 
only banks in the country whose bills had more than what 
might be termed a mere local credit, and the question of 
finding some convenient medium with which a traveler 
could meet his current expenses was troublesome and its 
solution a source of expense. The country was nominally 
on a specie basis, but the actual amount of gold in circula- 

a Economic Essays, by Dunbar. Edited by O. M. W. Sprague, p. 322. 






National Banking System 

tion was insignificant. In any event it was almost im- 
practicable for a traveler to carry with him the coin nec- 
essary to meet his expenses for a protracted journey, and 
except coin there was nothing that was universally accept- 
able. The percentage of notes of doubtful value which 
were in circulation in the Western States was so great 
that the knowledge of an expert was required at every turn 
to determine what to receive and what to reject. 

A writer in the National Intelligencer of February 4, 
1863, thus describes the situation: "Heretofore, although 
one nation, bound together by the ties of consanguinity, 
of a common language and an interstate and international 
commerce, we have been separated by diverse systems of 
currency, bounded by the state lines, and as widely variant 
as those which mark the alien and often hostile princi- 
palities and powers of Europe. London and Munich, 
Paris and St. Petersburgh are not more inaccessible to 
each other, except by the financial bridge of exchange, than 
are New York, St. Louis, Boston, and Chicago." 

The Independent, January 15, 1863, speaking of the 
great load that was imposed upon our merchants by this 
internal exchange, said of a uniform currency, that "if 
adopted, millions of dollars, it is truthfully alleged, will 
be saved in the way of exchange, which for years past has 
been an enormous tax on the whole community." 

TRAVEL IN THE INTERIOR DIFFICULT. 

There appeared in Hunt's Merchants' Magazine for 
January, 1863,° an article "By a Western Banker" 

« Published separately in pamphlet form under title of "A Uniform 
National Currency." 

13 



National Monetary Commission 

(J. J. K.), presumably John Jay Knox, who was after- 
wards Comptroller of the Currency, in which the evils 
of the situation were portrayed in the following pic- 
turesque language: "A foreigner or stranger traveling 
through the country, at the hotel, in the railroad car, on 
the river or lake, by friend and foe, has offered to him in 
exchange for gold slips of engraved paper similar in size, 
but as often worthless in value, (sic) as equal the sum 
they represent and promise to pay." "In the West 
the people have suffered for years from the issues of 
almost every State in the Union, much of which is so irre- 
deemable, so insecure, and so unpopular as to be known by 
opprobrious names rather than the money it pretends to 
represent. There the frequently worthless issues of the 
State of Maine and of other New England States, the 
shinplasters of Michigan, the wild cats of Georgia, of 
Canada, and Pennsylvania, the red dogs of Indiana and 
Nebraska, the miserably engraved notes of North Carolina, 
Kentucky, Missouri, and Virginia, and the not-to-be-for- 
gotten stumptails of Illinois and Wisconsin are mixed in- 
discriminately with the par currency of New York and 
Boston, until no one can wonder that the West has be- 
come disgusted with all bank issues and almost unani- 
mously demand that such a currency shall be taxed out 
of existence, and give place to a uniform national cur- 
rency. " 

, Senator Sherman in a speech in the Senate in February, 
1863, quoted from a recent article in the "London Times " 
the following estimate of the condition of our currency : a 

a Congressional Globe, February 10, 1863, p. 842. 



National Banking System 

11 By the want of a paper currency that would be taken 
in every State of the Union at its nominal value the 
Americans have suffered severely. The different States 
were as to their bank notes so many foreign nations each 
refusing the paper of the other, except at continually 
varying rates of discount. Frequently there was a greater 
loss on paper taken or sent from an eastern to a western 
State than on English bank notes converted into Austrian 
money in Vienna. Only adepts and regular money 
changers could tell whether a note was current or not, the 
paper of broken or suspended banks remaining in circula- 
tion long after their value had departed. The Federal 
Government avoided loss by refusing all paper money of 
every kind. Its import duties were taken only in gold, 
and internal revenue it had none. The first appearance 
of a department for collecting that kind of taxation is in 
the present bill proposed by Mr. Chase. But the diffi- 
culties of the Government have compelled it to issue a 
paper that will pass current in any part of the territory. 
Through the evils of the war the people will at least gain 
that deliverance from the previous confusion of their cur- 
rency which to Europeans appears a barbarism. If the 
social storm sweeps away the "wild cat" and bogus 
banks of the Union, it will have left some small compensa- 
tion for the wreck of better things." 

LOSSES THROUGH FAILURES. 

A writer in the National Intelligencer of January 

24, 1863, called attention to the fact that in 1861 and 

1862 there was a diminution of the circulation in the 

Northwestern States "owing to the failure of 100 or 

29582 — 10 2 15 



National Monetary C o mm is s to 



n 



more banks in Illinois and Wisconsin." This dimi- 
nution was only accomplished through loss to the pub- 
lic, and this point was feelingly brought forth in an 
article in Hunt's Merchants' Magazine in February, 1862. 
"The losses," the writer said, "which have in times 
past been sustained by bill holders have been immense 
and have fallen mainly on the poorer classes. It has 
been satisfactorily ascertained by careful examinations 
that the people have suffered to the amount of more 
than $100,000,000 by broken bank notes since our 
present system came into being." This article was 
written in response to the suggestion of a national cur- 
rency made by Secretary Chase in December, 1861. In 
that report the Secretary said: "The value of the exist- 
ing bank-note circulation depends on the laws of 34 
States, and the character of some 1,600 private cor- 
porations. It is usually furnished in greatest propor- 
tions by institutions of least actual capital. Circulation 
commonly is in inverse ratio of solvency. Well-founded 
institutions of large and solid capital have in general 
comparatively little circulation, while weak corporations 
almost invariably seek to sustain themselves by obtain- 
ing from the people the largest possible credit in this 
form." Following out the thought contained in this 
suggestion, the writer in the magazine said such banks 
"make it their chief business, in fact, to manufacture 
and put out as large an amount as they can by any con- 
trivance keep in circulation — $5, $10, $20, $40 for one 
in specie. The Illinois banks had, for example, on the 
1st of January, i860, a circulation of $8,981,723; specie 



16 



National Banking System 

on hand only $223,812, or $40 to $1, to say nothing of 
$697,037 they owed besides for deposits." 

A contributor to the Bankers' Magazine in January, 
1 86 1, speaking of the expansion of the currency of the 
Illinois banks in i860 by an amount of $1,400,000, made 
the following assertion: "This statement embraces the 
return of 94 banks, more than half of which are merely 
banks of circulation without capital and doing no busi- 
ness at their nominal locations. Only 1 out of 94 is 
established at Chicago; not one at Springfield." 

To appreciate the feeling that existed concerning the 
currency that business men in the West were compelled 
to make use of prior to the passage of the national banking 
act, we may turn to the contemporary discussion in the 
West. If the language used shall seem strong, we must 
remember that it was addressed to a community familiar 
through daily experience with the facts set forth in the 
arguments. Hence we may conclude that the general 
picture presented by the authors is not much overdrawn. 

RAGGED AND WORTHLESS BILLS IN CIRCULATION. 

December 13, 1861, the Chicago Tribune called the 
notes then in circulation "the ragged and doubtful 
issues of 1,600 corporations." The writer of the article 
in the "Tribune" referred with respect to the "great 
banks of the country," those in New York, Boston, 
and Philadelphia, but regarded as a menace certain 
banks "in New England, New Jersey, Ohio, and Penn- 
sylvania, where the habit is to issue $2 in notes for 
each dollar of capital, and where the only sources of 
revenue are in sums that customers pay in the shape of 

17 



National Monetary Commission 

interest on what the banks owe." He spoke of recent 
Illinois banks ''that did business without any capital 
and that never pretended to pay their debts save in 
Missouri or Virginia bonds at some uncertain rate per 
centum * * *." This "bank nuisance," he said, "has 
become unbearable — a source of heavy loss, of infinite vex- 
ation, and of perplexing uncertainty to all business men." 

The same paper January i, 1862, said: "But what 
shall we say of our currency of the present time, of our 
wicked, clumsy, absurd banking system? * * * What 
power shall put the curb on the 1,600 makers of paper 
money in the States of the Union? What shall hinder 
them from reducing the currency to a dead level in 
value with that of continental money at the close of 
the revolution, or with that of French assignats during 
the days of the directory?" Farther on the writer 
spoke of "this ruinous paper-money system, which knows 
nor admits no control, which is managed alone for 
private profit, and often in flagrant disregard of the 
public weal * * *." 

The evil was of course continuous, and on the 24th of 
March, 1863, the same paper described the currency then 
in circulation as "poor, mean, unsafe, inconvenient, and 
tormenting," and called the bills "notes of the shin- 
plaster shops called 'local banks.' Torn, greasy, issued 
by nobody knows whom, payable — if payable at all — in 
other scraps of printed paper, like those on demand, not 
1 in 5 of which is as good as the notes for an equal amount 
of any solvent business man; yet all clothed by custom 
and prescription with the attribute of money." 



18 



National Banking System 

JAY COOKE'S OPINION. 

Oberholtzer, in his "Jay Cooke, Financier of the Civil 
War," quotes from Cooke's "Memoirs," a diatribe against 
the currency from which a few extracts will give us the 
estimate placed upon a part of the notes then in circula- 
tion, upon which merchants and bankers were compelled 
to rely for remittances. After stating that their value 
depended upon the prosperity, good management, and 
honesty of the banks which emitted them, he goes on as 
follows : a 

"In most cases a bank could issue circulation far be- 
yond the amount of its capital stock. I have known 
instances in which banks have issued eighteen or twenty- 
five times the amount of their capital, and, so far as the 
public was concerned, with no other security than the 
good faith of the institution." 

"Confusion worse confounded was the order of the day. 
Exchange upon Philadelphia, New York, and Boston, 
when procurable, rated all the way from i to 10 and 
15 per cent premium, according to the locality. 
Notes were printed upon every variety of paper, and no 
two banks issued bills of similar appearance. It was 
generally the case that bank notes current in one State 
could not be current in the other States, and it was im- 
possible for anyone but those skilled in handling money 
in vast quantities to detect the innumerable counterfeits 
and altered notes which were then in circulation. The 
banks were breaking constantly, and in many instances 
circulating notes became almost worthless. Fifty mil- 

° Vol. I, p. 327. 
19 



National Monetary Commission 

lions of dollars per annum, it is safe to say, would not 
cover the loss to the people of this country growing out 
of broken banks, counterfeits, altered notes, and cost of 
exchange between different points." 

It must be borne in mind that the part of the country 
which suffered most from this state of affairs was the 
rapidly growing West, where business reputations were 
quickly gained, and where newcomers in the field of 
business were not looked upon as intruders. So also it 
must be remembered that this was not a new experience. 
The whole country had before this suffered in a similar 
way in its experimental use of credit as a basis for a cir- 
culating medium, and in the seaboard States efforts were 
at this time being made, and that too with comparative 
success, to restrain the excessive use of credit and to pro- 
tect note holders. 

PROTESTS OF GOVERNORS. 

From time to time protests had been raised in the West, 
and ineffectual efforts had been put forth there, by those 
holding responsible offices, to remedy the evils of the 
situation. 

In 1853 the governor of Indiana, referring to the organi- 
zation of State banks of issue, said in his message : a "The 
speculator comes to Indianapolis with a bundle of bank- 
notes in one hand and the stock in the other; in twenty- 
four hours he is on his way to some distant point of the 
union to circulate what he denominates a legal currency, 
authorized by the legislature of Indiana* He has nomi- 

a Quoted in Bankers' Magazine for October, 1882, vol. 37, or vol. 17, 3d 
series, p. 278. 



National Banking System 

nally located his bank in some remote part of the State, 
difficult of access, where he knows no banking facilities 
are required, and intends that his notes shall go into the 
hands of persons who will have no means of demanding 
redemption." 

The governor of Michigan, in his message for the same 
year, said: "At present we are giving charters to the 
issues of banks (sic) about which we actually know noth- 
ing, in whose management we have no participation, and 
are thus literally paying a large tribute for what generally 
in the end proves to be a great curse," 

Governor Lord (sic, the name should be Ford) of New 
Jersey said: a "In many cases our banks, although osten- 
sibly located in New Jersey, have their whole business 
operations conducted by brokers in other States. The 
facility with which they may be organized and located, 
without reference to the wants of the community or the 
business of the place, is destructive of all legitimate ends 
of banking." 

Salmon P. Chase, in his inaugural address as governor 
of Ohio, in 1856, 6 touched briefly on this subject and indi- 
cated that relief was to be found through the use of coin 
supplemented by a uniform currency to be gained through 
congressional legislation. 

FLUCTUATIONS IN QUANTITY. 

Occasional acts of suppression on the parts of individ- 
ual states, and failures in years of depression, once in a 
while operated to reduce the number of banks, while at 

a Quoted in Bankers' Magazine for October, 1882, vol. 37, or vol. 17, 3d 
series, p. 278. 

& Inaugural address of S. P. Chase as governor of Ohio in 1856 (Colum- 
bus, 1856), p. 3. 

21 



National Monetary Commission 

other times the creation of new corporations would in- 
crease their number and in consequence the amount of 
notes in circulation would fluctuate. The finance reports 
for 1862 and 1863 supply figures which illustrate these 
points. In 1857, 1,416 banks furnished about $215,000,- 
000 of circulation. In 1858, while there were six more 
banks the circulation under pressure from the panic of 
the previous year fell off to $155,000,000. The situa- 
tions for the next five years were respectively as follows: 
In 1859, I >476 banks, $193,000,000 circulation; in i860, 
1,562 banks, $207,000,000 circulation; in 1861, 1,601 
banks, $202,000,000 circulation; in 1862, 1,492 banks, 
$183,000,000 circulation; in 1863, 1,466 banks, $238,- 
000,000 circulation. 

GREATEST TROUBLE IN THE WEST. 

The impression made by this cumulative rehearsal of 
the evils under which the entire country, but more espe- 
cially the West, was laboring in 1861, may perhaps be 
stronger than a more complete view of the situation 
would justify. It is true, that the various statements 
made are undoubtedly well founded, but the entire truth 
is not sufficiently brought forth. There were strong 
banks in the East in the great business centers. The 
troubles experienced in the West were only felt by busi- 
ness men in the East, in so far as they were in touch with 
the quarters in which the troubles existed. Locally they 
were practically exempt, and the greater part of the vol- 
ume of bills in circulation in the East were to be relied 
upon. The limitation of the area of the free circulation 



National Banking System 

of the good bills was, even with the best of them, a dis- 
advantage to the banks which issued them, to the com- 
munity in which the banks were established, and to the 
regions where their circulation was impeded. It is but 
fair to the bankers, who, when the opportunity was 
offered them to furnish the country with a uniform cur- 
rency, rejected Mr. Chase's proposition voluntarily to 
nationalize their institutions, that in connection with 
this development of the evils of the currency, we should 
call attention to the alleviating features of their geo- 
graphical distribution. 

COUNTERFEITS. 

One great burden imposed upon the public at this time 
was the necessity for constant discrimination between 
the genuine bills and the enormous number of counter- 
feits then in circulation. Careful inspection of all bills 
was necessary. Situated as we are to-day, with a lim- 
ited number of designs for bills in circulation, uniform 
throughout the entire country, the extent of the use of 
which permits the engraver to avail himself of every pos- 
sible exercise of skill in the preparation of his plates, no 
matter how expensive it may prove, we can scarcely 
appreciate the skill and acuteness demanded of a bank 
teller in those days, if he would avoid receiving the fraud- 
ulent and altered notes in circulation, the number of 
which known to be on the market was to be measured 
by the thousands. The extent of the different designs 
on the various bills in circulation furnished a wide held 
for the skill of the counterfeiters, who not only repro- 



23 



National Monetary Commission 

duced excellent facsimiles of actual existing bills, but 
also by delicate manipulation altered the denominations 
of small bills, converting them into those of higher value. 
All of this resulted in the creation of a special literature. 
"Counterfeit Detectors" were published as serials in all 
of our principal cities. "A pamphlet bank-note de- 
tector," says Professor Dunbar, a "was a part of the outfit 
of every well-provided counting room." Associations 
were formed for the suppression of counterfeiting and 
the author just referred to records that "the New Eng- 
land association for the suppression of counterfeiting 
paid for sentencing 228 persons during the four years, 
1858 to 1861. It received an annual subsidy from the. 
State of $1,500." 

The "Western Banker" who contributed the article to 
Hunt's "Merchant's Magazine" in January, 1863, already 
referred to, thus describes the situation: " If any man has 
the curiosity, or will take the trouble to study the statistics 
contained in either of the quarto volumes which are weekly 
published in all the large cities under the name of ' Coun- 
terfeit Detectors,' he will find that there are in existence 
nearly sixteen hundred different banks, and that from 
these banks are daily being issued more than 10,000 dif- 
ferent kinds of bank notes, and that a large portion of these 
issues have been frequently copied and put in circulation 
by the counterfeiter and his copartners in business." ' 

The mere statement of these facts is perhaps sufficient, 
but the impression made by them upon participants in the 
confusion resulting from their existence is- perhaps more 

a Economic Essays, p. 325. 
24 



National Banking System 

essential for our purpose. Even after the elimination of 
the southern banks the figures required to describe this 
condition of affairs were impressive. The Chicago Trib- 
une, on the 13th of February, 1863, after stating that 
there were at that time 1,395 existing banks in the loyal 
States, goes on to say: " Every one of these banks has its 
separately engraved and printed notes, differing more or 
less in form or design pictorially, and each bank issues the 
various denominations which by usage seem to have 
become the rule." 

"Taken together, each bank issues at least bills of six 
different denominations. The 1,395 banks therefore issue 
8,370 varieties of notes, which people are expected to dis- 
tinguish from counterfeits. Moreover, the varied issues 
of the fraudulent broken and worthless banks should not 
be overlooked. Of this class of ' retired banks,' as they are 
styled, 854 are enumerated in the published list furnished 
by the ' descriptive list ' for January, 1863. Such as these 
have therefore contributed and in many instances still 
contribute their quota to this promiscuous catalogue." 

"One phase of our paper currency engendered by this 
multiform system calls for special notice and consideration. 
We refer to counterfeiting. It may be safely stated that 
the art, as pursued in the United States, is without par- 
allel, and that without vaunt or hyperbole, we can 'beat 
the world ' on this, our national specialty — counterfeiting. 
A species of literature, even unknown to the rest of the 
1 world, has been initiated among us, and no merchant or 
mechanic deems himself safe unless he consults the ' Coun- 
terfeit Detector.' * * * The absolute facts, as detailed 



25 



National Monetary Commission 

by those interested in keeping the records of counterfeits, 
appear monstrous and fabulous even beyond credence. 
Of the various kinds it is estimated that there are about 
six thousand. * * *. Of the various species of 'coun- 
terfeits,' as they are called, it is ascertained that but a small 
part of those in circulation is composed of bona fide imita- 
tions of the genuine notes. Those known as alterations 
number highest. One cause of this multiplicity of altered 
notes is attributable to the similarity of titles among 
banks in different sections of the country. As, for instance, 
we find 27 Union banks, of which 7 are in the State of New 
York. A yet further aid to ' alterations ' is in the frequent 
use of the same devices on notes of different banks, and 
often of different banks of the same name. ' ' Although the 
picture is drawn at a later date than that which we are at 
present considering, it nevertheless is equally true for the 
year 1 861, and must be accepted as such. 

A writer in the Bankers' Magazine, in November, 
1862, stated that experienced New York bankers and a 
former bank-note engraver were unable to detect certain 
fraudulent notes. His conclusion was: "If experts such 
as bank tellers and bank-note engravers are so readily 
deceived by well-executed fraudulent bills, it can not be 
expected that merchants, traders, and others will be 
prepared to detect such frauds." 

U)CAI, RESTRICTION AND INSPECTION PROPOSED. 

Such, in a general way, was the condition of the cur- 
rency in use in our mercantile community which con- 
fronted Mr. Chase when he was suddenly called upon to 



26 



National Banking System 

administer the finances of the Government, under circum- 
stances for which there was no precedent, and which 
would compel decisions on his part the determination of 
which, whether right or wrong, whether for better or 
worse, was sure to be questioned. The only thought of 
any remedy for the currency situation generally enter- 
tained at that time would seem to have been through 
state legislation. Restriction of the proportionate circu- 
lation, improved government inspection, and more careful 
supervision of the bonds offered under the free banking 
laws for security were the proposed methods. ''In most 
of the New England States," said Professor Dunbar, a 
"the chief effort of legislation was to restrict circulation, 
this form of liability still continuing down to i860 in all 
these States, except Massachusetts, to be more important 
in amount than the deposits." The same author said: 
" In every New England State the legislature had placed 
the banks under the supervision of one or more commis- 
sioners, armed with certain powers of inspection and inves- 
tigation and had provided for returns of the condition of 
every bank to be made to the state authorities. As to 
the frequency of such returns, however, there was no 
uniformity * * * ." This author also gave some 
particulars as to the character of the bonds deposited in 
some of the States to secure the circulation. It was clear 
that steps were being taken to avert some of the perils of 
the situation, but evident that relief in the way that 
naturally would be taken could only come after long 
probation of the evils. 

a Economic Essays, p, 318. 
27 



National Monetary Commission 

WHAT THE TREASURER COULD RECEIVE. 

At some point in this discussion some reference must 
be had to the existing laws with reference to the money 
which could be received by the various agents of the 
United States to whom payments of one kind or another 
were made. At the outset of Mr. Chase's career the 
question of what collectors could or could not receive 
was of comparatively little consequence, but at a later 
date it became of great importance. The bearing of what 
has just been said will be appreciated when we ascertain 
the limitations imposed by the Government upon receipts 
at the Treasury at this time. 

The law relating to government collections had under- 
gone sundry changes, coincident with several periods of 
financial excitement. In 1789, it was provided that ton- 
nage and import duties should be made in coin alone. a 
In 1800, it was provided that payment to the United 
States for land in the Northwest Territory should be 
made in specie or in evidences of the public debt. In 
181 6, provision was made by joint resolution, that there- 
after all dues to the United States should be collected in 
the legal currency of the United States, or treasury notes, 
or notes of the Bank of the United States, or in notes of 
specie-paying banks. 5 This permission to receive notes of 
specie-paying banks worked disadvantageously to the 
Government when the Northwest Territory was opened 
up to settlement, and in 1836, during the height of the 

aBrightly's Digest, Ed. 1858, p. 888, § 58. 

& This provision is referred to in the act of July 4, 1840. 5 Statutes at 
Large, § 19, p. 893. 



28 



National Banking System 

inflation and speculation, efforts were made to secure the 
repeal of this resolve. These efforts were however vain, 
and after the adjournment of Congress, Jackson issued 
his famous "Specie Circular," which limited to specie 
the money permitted to be received by the government 
land commissioners. A bill rescinding this order was 
passed by Congress, March 2, 1837, but it failed to become 
a law, through Jackson's refusal to put his signature to it. a 
Van Buren continued to enforce the rule laid down in the 
"Specie Circular." 

In 1840 an act was passed 6 modifying the resolution 
of 181 6, but ignoring the intervening "Specie Circular." 
One-fourth part of all payments for duties, taxes, sales 
of public lands, debts, and sums accruing or becoming 
due to the United States before June 30, 1841, was to be 
collected in "legal currency of the United States." For 
the succeeding year an additional fourth. For the year 
ending June 30, 1843, still another fourth was to be col- 
lected in this manner, and after that all sums for the 
purposes before mentioned and all sums due to the Post- 
Ofhce Department were to be paid in gold and silver. 
This act was repealed August 13, 1841.° On August 6, 
1846, it was enacted that all payments to the Government 
should be made in gold and silver coin only or in Treasury 
Notes issued under the authority of the United States 
on and after January 1, 1847.^ 

a Parton's Life of Jackson, vol. iii, p. 625. 

& 5 Statutes at Large. An act to provide for the collection, safe-keeping, 
transfer, and disbursement of the public revenue, § 19, p. 390. 
c 5 Statutes at Large, p. 439. 
^9 Statutes at Large, § 18, p. 64. 



29 



National Monetary Commission 

When it came to negotiating loans with the banks, the 
impossibility of suddenly withdrawing from the market 
and transferring the vast sums required by the Govern- 
ment from the vaults of the banks to the sub treasuries, 
compelled some change in the definition of the powers 
of the Treasury in regard to deposits, and August 5, 1861, 
in the loan act a clause was inserted authorizing the 
Secretary of the Treasury to deposit the money to be 
obtained on the loans thus authorized to be made, in 
such solvent specie paying banks as he might select. Mr. 
Chase was not disposed to exercise his power of checking 
out these deposits in a way which was altogether satis- 
factory to the banks, and on the 4th of October, 1861, 
Mr. John E. Williams, president of the Metropolitan 
Bank of New York, wrote him a tart, not to say arrogant 
letter on the subject. This letter is not to be found 
in any of the fragments of Mr. Chase's correspondence 
which have been preserved, but it was reproduced by Mr. 
Williams himself in a letter to B. G. Spaulding of later date, 
which was printed by Spaulding in his " Extra sheets from 
Spaulding's History of Legal Tender Paper Money," etc. 

MR. CHASE'S INAUGURAL. 

The details heretofore given concerning the character 
of the money which could be received in the United 
States Treasury, in so far as they deal with matters in 
the past, are not absolutely essential for our consid- 
eration. They are worthy of note, however, as evi- 
dences of the prolonged struggle on the part of the banks 
to secure recognition for their notes. Mr. Chase was 
a hard-money man, and although it was urged by some 

30 



National Banking System 

that excuse might be found for receiving bank notes at 
the Treasury in some of the legislation relative to the 
establishment of subtreasuries, he continuously adhered 
to his original proposition. In his inaugural address as 
governor of Ohio in 1856 he thus defined his views: 
"A sound and sufficient currency is indispensable to the 
welfare of every civilized community. The best practi- 
cable currency in my judgment would be a currency of 
coin, admitting the use of large notes only for the con- 
venience of commerce. Such a currency, however, is 
only attainable through the legislation of Congress and 
the action of the General Government." This attitude 
became of the utmost importance after the passage of 
the internal-revenue act. 

GOVERNMENT DEPOSITORIES. 

There was still another point, which at the outset of 
Mr. Chase's career as Secretary was of little importance, 
but which was destined to become of great consequence to 
him in carrying out his schemes in the near future, and 
that was where should government officials, receiving 
money in their official capacity, make their deposits? 
The designated depositories of the United States were 
under ordinary circumstances sufficient in number and 
were adequate for the purposes for which they were 
created, but the clause in the law of 1846 which pre- 
vented the use of banks for that purpose placed limi- 
tations and responsibilities on the officers having charge 
of the government funds, which it was plain would prove 
troublesome in case of the enlargement of their functions 
or the increase of the area of their action. 
29582—10 3 31 



National Monetary C ommis s io 



n 



FINANCE REPORTS, 1 86 1. 

At the extra session of Congress in July, 1861, Mr. 
Chase submitted his first report. He estimated that 
there would be required to meet outstanding obligations 
of the Government, to pay interest, and to satisfy appro- 
priations already made or required to be made by the 
extraordinary exigencies of the Government for the fiscal 
year ending July 1, 1862, $318,500,000. This was an 
amount far beyond the capacity of our banks and bankers 
to furnish through any ordinary methods, being greatly 
in excess of the entire amount of coin in use in ordinary 
business in the country. Estimates varied greatly as 
to what that amount was, some placing the entire amount 
in the banks and subtreasuries at but little over $200,- 
000,000, others raising the limit to $275,000,000. This 
enormous increase of the use by the Government of 
the coin in the country when added to the normal demands 
of current business did not seem to Mr. Chase to be 
beyond the possibility of achievement, «and in his an- 
nual report in December, 1861, in which he submitted 
various arguments in behalf of the establishment of a 
national banking system, he said: ''The large amount 
of specie now in the United States reaching a total of 
not less than $275,000,000, will easily support payments 
of duties in coin while these payments and ordinary 
demands will aid in retaining the specie in the country 
as a solid basis of circulation and loans." He then went 
on to say (assuming as a condition precedent the nation- 
alization of the banks), that the whole circulation, 
whether of coin or bank notes would bear the impress 



National Banking System 

of the nation and would not be likely to be increased 
beyond the real wants of business. These words were 
written and the report was submitted to Congress before 
the suspension of specie payments, which took place 
within less than a month after the report was submitted. 
The suspension greatly modified the prospects of relief 
to be obtained from nationalizing the banks, and com- 
pelled financial steps which with the growing magnitude 
of the expenditures of the Government minimized 
the argument of the immediately pending nature of the 
relief to be derived from the banking scheme, but greatly 
increased the potency of the claim that such institutions 
could be used for government depositories. 

THE BANKS SUSPEND. 

The suspension of the banks, although inevitable in the 
near future, was precipitated by the emission of United 
States notes to meet the current expenses of the Govern- 
ment. Writing to Mr. J. T. Trowbridge at a later date, 
Mr. Chase said the banks wanted him to suspend the 
emission of government notes, give credit to them for 
subscriptions and accept in payment of drafts on them 
such funds as they could furnish. He replied that if they 
would furnish him what gold he required he would with- 
draw the government notes already issued and agree to 
emit no more, but unless they could do that he must con- 
tinue to make use of the government credit in this form 
as far as his necessities should require. He further said 
that "it soon became plain that the bank note circulation 
could not be sustained at par of coin unless made receiv- 
able by the Government, and that it could not be made 

33 



National Monetary Commission 

so receivable without risk of serious, perhaps irretrievable 
financial embarrassment or disorder. In other words, it 
became plain that suspension was inevitable except by 
sacrifices which the banks could not make." 

This letter to Mr. Trowbridge is in the possession of 
the Pennsylvania Historical Society. It bears no date, 
but was written after the suspension of specie payments, 
and the negotiation with the banks which is referred to 
was probably the one which drew forth the letter from 
Mr. John B. Williams which has been already alluded to. 

MARKETING THE BONDS. 

When Mr. Chase took his seat in the Treasury Depart- 
ment he found still unexhausted some of the borrowing 
capacity which had been conferred upon his predecessors. 
The credit of the Government during the last days of 
Buchanan's administration was clouded by doubts of 
what the 4th of March might bring forth, but the inaug- 
uration of Lincoln at the Capitol gave promise of a future 
for the country and furnished a rallying point for patriot- 
ism. Mr. Chase met the condition of the finances with 
quick action and with ingenious devices to secure support 
from the people, as well as from the great banking insti- 
tutions. He evidently regarded the normal rate of in- 
terest at that time for a twenty-year government bond 
as 6 per cent. Setting aside all considerations of tem- 
porary advantage to be derived from long term or indefi- 
nite loans such as are in favor in Europe, he adhered to 
the policy which has always prevailed in this country of 
loans with fixed terms. Recognizing the fact that under 
the disorganization then prevalent and the enormous war 

34 



National Banking System 

expenditures inevitably impending he could no longer 
claim that conditions were normal, he secured authority 
to negotiate bonds and notes of various length of terms, 
from noninterest-bearing demand notes to twenty-year 
bonds, the rate of the interest-bearing securities varying 
from 7 T 3 7 per cent for three-year notes convertible into 
6 per cent twenty-year bonds to St^ per cent one- 
year small denomination notes also convertible into long- 
term bonds, the whole being so arranged as to enable him 
to secure help from every available source. 

Hon. Samuel Hooper, reviewing the situation in a 
speech in the House in 1869,° thus described the numerous 
government obligations which were floated at one time or 
another, under the pressure of these circumstances: 
"Among the different forms of public debt were 'certifi- 
cates of indebtedness,' payable within one year from their 
date; 'temporary loans,' payable at ten days' notice; 
'compound-interest notes,' principal and interest payable 
at maturity; and 'seven-thirty Treasury notes,' converti- 
ble at the holder's option into five-twenty bonds or pay- 
able at three years from date." The temporary needs of 
the Government having been provided for at these high 
rates of interest, he was able a few months later to launch 
the 6 per cent bonds, "redeemable after five years and 
payable in twenty," thus making provision for a reduc- 
tion of interest in the future, when the market might be 
better. The bankers protested against this redemption 
clause, and insisted that it would imperil the negotiation 
of the bonds, but Mr. Chase was firm, and not only were 

a Congressional Globe, February 5, 1869, p. 920. 
35 



National Monetary C ommis s to 



n 



the bonds floated with this clause, but at a later date he 
was able to negotiate a large number of 5 per cent bonds, 
redeemable after ten years and payable in forty. 

NATIONAL BANKS SUGGESTED. 

It was during the summer of 1861, when his active brain 
was at work devising schemes for raising money for the 
country through taxes and through loans, that he realized 
the advantage to be derived from "the preparation and 
delivery to institutions and associations of notes prepared 
for circulation under national direction and to be secured 
as to prompt convertibility into coin by the pledge of 
United States bonds." The predicted gains from the 
adoption of this plan were that the people "in their ordi- 
nary business would find the advantages of uniformity in 
currency; of uniformity in security ; of effectual safeguard, 
if effectual safeguard is possible, against depreciation; and 
of protection from losses on discounts and exchanges; 
while in the operations of the Government the people 
would find the further advantage of a large demand for 
government securities; of increased facilities for obtain- 
ing the loans required by the war ; and of some alleviation 
of the burdens on industry through a diminution of the 
rate of interest or a participation in the profit of circula- 
tion without risking the peril of a great money monopoly. 
A further and important advantage to the people may be 
reasonably expected in the increased security to the 
Union, springing from the common interest in its preser- 
vation, created by the distribution of its stocks to associa- 
tions throughout the country as the basis of circulation." 



36 



National Banking System 

This description of the advantages to be derived from 
the proposed currency is quoted from the finance report 
of December, 1861, in which Mr. Chase made a masterly 
presentation of the subject, and in which he also discussed 
the advantage to be derived from a circulation composed 
of government notes. The gains which were evident in 
the latter scheme — the permanent loan without interest 
of the amount of the emission and the furnishing of a 
uniform currency — would be desirable, he said, provided 
"such a circulation could be certainly and strictly con- 
fined to the real needs of the people and kept constantly 
equivalent to specie by prompt and certain redemptions 
in coin." He regarded as more than an offset to these 
advantages the temptation to issue an excess of notes, 
the hazards of panics, and the immeasurable evils of dis- 
honored public faith and national bankruptcy. 

He believed that the notes which he had suggested 
would furnish a suitable uniform currency, and he thought 
this step should be carried out "through the voluntary 
action of existing institutions." He was of opinion that 
the plan, if adopted, would "impart such value and sta- 
bility to government securities that it would not be diffi- 
cult to obtain the additional loans required for the service 
of the current and the succeeding years at fair and rea- 
sonable rates * * *." 

UNIFORM CURRENCY AND BOND MARKET. 

Whether the predominant motive for the establish- 
ment of a system of national banks, to be inferred from 
the arguments in this report, was that they would fur- 



37 



National Monetary C ommis s to 



n 



nish a safe uniform currency, or that they would provide a 
market for government bonds, it is evident that when he 
wrote this report Mr. Chase hoped for the immediate vol- 
untary transference of the entire circulation of the banks 
of the country from their own notes to government notes, 
and it is plain that his hopes for an early end to the war led 
him to overestimate the influence that this nationalization 
was ultimately destined to have upon the market, pro- 
tracted as the time was in which the transference was to 
be made through several years of patient waiting. The 
daily expenditures of the Government, large as they seemed 
at that time, shrank into insignificance when compared with 
the gigantic outlays of the next summer, and great as was 
the amount required by all the banks for security for their 
circulation, it formed, when it was actually used for that 
purpose, but a fraction of the national debt. The dis- 
bursements of the Government had crept up to between 
$2,000,000 and $3,000,000 a day, and the New York 
Journal of Commerce of January 20, 1863, in an article 
against Mr. Chase's scheme, showed the effects upon the 
imagination of the large sums with which the Govern- 
ment was then dealing, by saying, "if all the circulation 
should be based on entirely new bonds, the whole amount 
realized would be less than $200,000,000." The pro- 
vision of a market for two hundred millions was not 
worth considering, in the opinion of that paper. Never- 

a It must be borne in mind that concurrently with these proceedings the 
premium on gold had gone up, so that the expenditures of the Government, 
reduced to a coin basis, were not much over those of the previous year. 
Practically, however, these expenditures were ultimately paid at the fig- 
ures mentioned, in consequence of the resumption of specie payments. 



38 



National Banking S y s t 



e m 



theless the benefits to be derived by the Government 
from this feature were dwelt upon by Hon. Samuel Hooper 
in a speech in the House January 19, i863, a in which he 
said: "Another of the important benefits which the Gov- 
ernment would derive from this system of national banks 
would be the amount of United States stock which would 
be absorbed to be used as security for its circulation. 
* * * It must be clear to the feeblest comprehension 
that by so much as the credit and strength of the federal 
bonds would be improved by this plan of depositing 
them as security for the notes in circulation it would be 
sound policy to avail of it at this time when the necessi- 
ties of the public service require so large an amount of 
bonds to be issued." 

CONGRESS CHANGES ITS ATTITUDE. 

This speech of Hooper leads naturally to the considera- 
tion of the change of the feelings of Congress with regard 
to the plan for a uniform national currency which was 
evident at the time when the speech was made. This 
attitude was necessarily affected by current events, and 
foremost in their influence were those of a military or of 
a financial character. Pronounced success in the field at 
an early date in the war would have confirmed the existing 
belief that the conflict would not last long, and, as a con- 
sequence, it would have been assumed that the finances 
of the country would not be seriously deranged. On the 
other hand, disaster in the field or even lack of success 
made powerful the argument that the continuous dis- 

a Congressional Globe, 3d sess. 37th Cong., p. 385. 



39 



National Monetary C ommis s io 



n 



bursements occasioned by the military necessities de- 
manded pecuniary sacrifices from the people and might 
even call for a revolution of the banking system of the 
country. 

Setting aside for the moment all consideration of 
military affairs, let us take a glance at the growing influence 
of the financial situation, its imperative demands, and its 
pressing needs, and let us endeavor to measure the ever- 
increasing burden of the labor of providing funds for the 
Government, which had been placed upon the shoulders 
of the Secretary of the Treasury. The expenses of two 
months of war, at the rate of disbursement which was 
being made in the summer of 1861 , were equal to the entire 
national debt of July 1, i860. At a later date the 
expenditures of less than a month reached the same figure. 

When Secretary Chase, in July, 1861, reported that the 
exigencies of the Government would require for the fiscal 
year ending June 30, 1862, the sum of $318,519,581.87, 
the size of these figures, notwithstanding the fact that 
this amount was five times the total of the national debt 
in July, i860, and three and one-half times that of the 
debt of 1 86 1, did not seem to disturb the optimism of 
either Congress or himself. No conception was then had 
of the character of the contest upon which we had entered. 
By December of the same year, the financial difficulties 
attendant upon procuring the funds for such enormous 
and unprecedented expenditures gave birth in the mind 
of the Secretary to a keener perception of the task before 
him. Congress, however, was not at this time aroused to 
a full realization of what the Secretary was confronted 



40 



National Banking System 

with. In July, in response to an appeal on the part of 
the President for authority to borrow $400,000,000, the 
Secretary had been empowered to issue $250,000,000 in 
twenty-year bonds and three-year Treasury notes, 
$50,000,000 in noninterest bearing one-year notes, and 
another issue of notes at a lower rate of interest, amounting 
to $20,000,000, was also authorized. a 

It is no part of my purpose to enter upon any detailed 
statement of the complicated measures then taken by the 
Secretary to secure funds for the Government. These 
details have no immediate bearing upon the topic under 
consideration. The sole reason for this general review 
of the finances is to call attention to the influence that this 
growth of the national debt must necessarily have had 
upon Congress in the final determination of financial legis- 
lation. The estimate of $318,000,000 for the expenditures 
of the fiscal year of 1862 fell short by $240,000,000, 
and as early as December, 1861, Mr. Chase realized 
that he had not only underestimated the expenditures 
but that he had overestimated the receipts. He then 
thought that it would require an additional appropriation 
of $214,000,000 to make up the probable deficiency, being 
still short of what was actually required upward of 
$25,000,000. Experiences like these served to open the 
eyes of those who were in charge of affairs to the hazards 
to which their conjectures were exposed. 

Authority was given the Secretary in 1862 to negotiate 
the sale of $500,000,000 6 per cent bonds, redeemable in 
five years and payable in twenty. Then followed the 

a Bayley's National Loans of the United States, p. 78. 
4i 



National Monetary Commission 

wonderful success of the direct appeal to the people in 
placing this enormous loan. Simultaneously with the 
passage of this loan bill, authority was granted to emit 
$150,000,000 legal-tender Treasury notes, and July 11, 
1862, an additional emission of $150,000,000 of these notes 
was authorized. Still another $ 1 50,000,000 was authorized 
March 3, 1863. Fractional currency, certificates of 
indebtedness, compound-interest notes, and, later, coin 
certificates, all helped to swell the debt. The $65,000,000 
of national debt at the end of the fiscal year of i860 
became $91,000,000 in 1861, was $524,000,000 in 1862, 
and rose to $1,120,000,000 in 1863. The extraordinary 
expenditures which brought about this enormous increase 
of debt from year to year necessarily compelled consid- 
eration of the recommendations of the Secretary of the 
Treasury. Any radical departure from the plans under 
which he was seeking to procure funds must have carried 
with it a change in the head of the department at a period 
when such a change would have been full of peril. 

OPPOSITION OF SECRETARY TO LEGAL TENDERS. 

One other point concerning current financial events 
ought to be mentioned before we turn to Mr. Chase's cor- 
respondence for information as to schemes submitted for 
his consideration, and that is his opposition to the legal- 
tender feature of the greenbacks. The demand notes 
were not legal tender, and there was some hesitation in 
receiving them at first. Ultimately it became necessary 
to" attach the legal tender function to government notes 
in order to compel their reception in settlement of debts. 



42 



National Banking System 

In a letter addressed to Thaddeus Stevens, January 20, 
1862, Mr. Chase said: " It is not unknown * * * that 
I have felt, nor do I wish to conceal that I now feel, a 
great aversion to making anything but coin a legal tender 
in payment of debts." 

The passage of the legal tender law shortly thereafter 
destroyed the last hope for carrying on the affairs of the 
Government on a specie basis. Interest on government 
securities continued to be paid in gold and the principal 
of the long-term bonds would presumably be payable in 
coin, but the ordinary government obligations maturing 
from day to day could only be met in greenbacks. His 
desire, then, for a currency which should meet with prompt 
redemption in coin was therefore impracticable. 

It must also be borne in mind that the passage of the 
internal-revenue act modified the relative urgency of cer- 
tain of the motives which may have influenced Mr. Chase 
in determining the adoption of the national banking sys- 
tem as a measure of relief at this time. Hundreds of 
collectors were now to be appointed. They would need 
designated depositories in which they could place their 
collections. The greenbacks, to the extent that the banks 
required reserves, displaced a corresponding amount of 
gold held for that purpose which was sold, and thus 
through this withdrawal from circulation of the notes 
which were substituted in the bank reserves, only the bal- 
ance of the government notes fully performed the func- 
tion of furnishing traders a uniform currency. Mr. Chase 
was reluctant to emit more of them than he was forced 
to, and he therefore dwelt upon the possibility of such 



43 



National Monetary C ommis s to 



n 



a currency being furnished by the banks under his pro- 
posed system. 

MR. CHASE'S CORRESPONDENCE. 

The portions of the correspondence of Mr. Chase which 
have been preserved contain letters from persons scat- 
tered over the country, many of them from eminent men 
whose words of encouragement must have proved grateful, 
some from friends of the existing banks, others from critics, 
and not a few from well-meaning men of speculative tem- 
perament who felt impelled to come to the aid of the Sec- 
retary. Their consideration at this point is desirable. 

January 8, 1861, L. M. Kellogg, of San Francisco, wrote 
Mr. Chase a recommending him to meet the current ex- 
penses of the Government with noninterest-bearing treas- 
ury notes, which should be redeemable at all subtreasuries 
in gold and silver, or at the option of the Government in 
interest-bearing treasury notes, the interest of which 
should be payable in specie. 

June 22, 1 86 1, Mr. A. Campbell wrote from La Salle a 
that 90 per cent of the people were in favor of the emis- 
sion by the Government of noninterest-bearing treasury 
notes, in denominations from $5 to $500, redeemable at 
the end of two or three years, for the purpose of supplant- 
ing the worthless trash in circulation. 

S. N. Goodale wrote from Cleveland, Ohio, June 26, 
1 86 1, that the West wanted interest-bearing notes in 
small denominations, payable in twenty years if not 
redeemed before. 

o MS. Chase Letters, Library of Congress. 



44 



National Banking System 

July 7, 1 86 1, Mr. E. Littell wrote from Boston, a sug- 
gesting that if the treasury drafts on the mints and sub- 
treasuries were made in small sums and on paper specially 
prepared and with special engraved designs, these drafts 
might be made to serve as currency. He called atten- 
tion to the fact that in England there were twenty millions 
sterling of similar drafts constantly afloat in the market. 

O. B. POTTER SUBMITS A PLAN. 

Mr. O. B. Potter submitted a plan to Mr. Chase's con- 
sideration on the 19th of August, i86i, & which bears a 
close resemblance to the scheme set forth in the Treasurer's 
report of that year. It is of sufficient importance to be 
given in full. 

Hon. S. P. Chase, 

Secretary of United States Treasury, Washington, D. C. 
Dear Sir: I beg leave to suggest for your consideration a plan which 
occurs to me as certain if adopted to secure for the country several ends 
always important, but especially so now. 



Allow banks, and bankers duly authorized in the loyal States, to secure 
their bills by depositing with a superintendent appointed by the Govern- 
ment United States stocks at their par value in the same way that the 
banks and bankers in New York secure their circulation by depositing 
New York State and United States stocks with the State, thus making the 
stocks of the United States a basis of banking on which alone a national 
circulation can be secured. 

To do this it is necessary only for the Government to authorize and 
appoint a superintendent connected with the Treasury whose duty it shall 
be to receive from duly authorized banks and bankers within loyal States 
United States stocks in sums of not less than $200,000 from one party and 
hold the same as security for an equal amount of bills to be properly stamped 
and signed by such superintendent and delivered to the depositing bank or 
banker. 

a Dated Office of Littell' s Living Age. MS. Chase Letters, Library of 
Congress. 

& MS. Chase Letters, Library of Congress, 

45 



National Monetary C ommis s to 



n 



This mark or stamp and signature of such superintendent to guarantee 
to the holder of the bills issued that the same are secured by United States 
stocks deposited with and held by the Government, and that in case the 
same shall fail to be redeemed by the bank or banker issuing them, then on 
due demand and protest such superintendent will sell upon proper notice 
to the bank or banker and apply to the redemption of said bills the stocks 
held to secure the same. 

This money might properly be designated United States currency as dis- 
tinguishing it from the bills issued in the several States and not thus secured, 
and should be so plainly and unmistakably designated as to be readily dis- 
tinguishable anywhere at sight. 

It might be received and paid out by the Government in cases where it is 
not otherwise agreed or provided, but this is not at all essential to the plan, 
and might encounter the prejudices of those who think specie more reliable 
than the faith and covenant of the Government under which they live. 

The plan will be fully understood by an examination of the statutes of 
this State regulating the securing of their circulations by our banks by 
deposit with the State. 

The objects which will be reached by this plan are: 

i. It is obvious that the bills thus secured will have, in whatever State 
issued, a national circulation, and be worth the same in all parts of the 
country. Nay, these bills would be worth their face wherever American 
commerce is known, a ready medium of exchange would be always at hand 
throughout the country, and between all parts of it, and all fluctuations and 
trouble in this respect would be forever ended. 

2. The fact that in this way banks and bankers could obtain a national 
circulation for their bills, would make United States stocks eagerly sought 
after by them, and their price would be always maintained at or above 
par though they bear only a low rate of interest; 4 percents could never 
fall below par after the system is fairly understood and at work. 

3. This will enable capitalists in the older States by investing in United 
States stocks to engage in banking and furnish a currency to the younger 
States which will be equally serviceable to them as if issued in their own 
States ; a bill thus secured issued in Boston will circulate as well in Oregon 
as if issued in Oregon, and probably better. 

4. None of the objections justly urged against a United States bank lie 
against this plan. It gives to the Government no power to bestow favors 
and does not place a dollar in its hands to lend. It leaves the banks and 
bankers of the several States to do the business as now in the same banking 
houses and under the same direction, within such safeguards and limitations 
as the several States may themselves impose. The banks will hold their 
charters from, be controlled by, and be accountable to their several States 
as before. All the Government does by this plan is to place upon so much 
of the currency as is secured by its own stocks the stamp of nationality, 
to the extent of placing upon each bill so secured its assurance that the bill 



46 



National Banking System 

is so secured to the bill holder, and that upon failure of the bank the stocks 
deposited with the government officer shall be by him sold and the proceeds 
applied to redeem the bills. 

5. If the United States debt should not be sufficient to afford sufficient 
security for the bank circulation of the country, the banks can issue bills 
for domestic circulation secured by the stocks of their own States as they do 
now, the bills being so marked as to be readily distinguishable at sight 
from those secured by United States stocks. Indeed, all the bills secured 
by United States stocks deposited with the Government should have 
engraved upon them some suitable stamp which should be the same upon 
every bill, so that it might readily become familiar to everybody. 

6. This would make the Government and the capital mutually dependent 
on each other, and every bank and banker would feel a daily interest in 
supporting and keeping the Government credit above suspicion. Every 
citizen, too, who is supplied with such a currency — a currency which will be 
equal to gold throughout every foot of our territory, and everywhere of the 
same value, with which he can travel from Oregon to Florida, and from 
Maine to Mexico — would feel and realize every time he handled or looked 
upon such a bill bearing the national mark, that the union of these States 
is verily a personal benefit and blessing to all. 

If it is thought more prudent, but 90 per cent of the stocks deposited may 
be issued in bills, and thus all fluctuations in the stocks be provided against. 

Exactly what legislation would be required to carry out this plan you 
will readily see. One simple statute creating the superintendent, and direct- 
ing him how to receive and hold the stocks, mark the bills, and sell and 
apply the stocks to the redemption of the bills in case of failure of any bank 
issuing them would be all that would be demanded. Such a statute 
passed and the national stocks would instantly be absorbed by the banks, 
because thus and thus only could they make their circulation national. No 
sooner would One bank supply itself with such a currency than all must in 
self-defense, because the people would have a national currency for daily 
use, and would deal with the banks who could supply this. 

The several States will promptly provide the required legislation on 
their part by providing that this United States currency need not be further 
secured by deposit with the State. 

The adoption of this plan could not fail to put an end to all financial 
troubles during the war, and be an increasing benefit and blessing ever 
after. While it would supply all the means required for the war, it would 
instantly enable the older and newer portions of the country to increase 
their trade with each other by supplying to such nearer portions an abun- 
dant and perfectly safe currency. 

If it be said that this plan bases the currency upon a permanent national 
debt, the answer is: It bases so much of the currency as is necessary for 
purposes of exchange and interstate commerce upon the credit of the 
nation, and leaves with the nation, by regulating the amount of its debt, 

29582—10 4 47 



National Monetary Commission 

or limiting the amount of bills which may be thus stamped and secured, 
the power to control the amount of the national currency and keep it 
within the wants of the people, while the power of loaning the money and 
using it reposes with the people exactly as now through their banks. 

Bankers can get no more bills than Congress authorize: and legislators 
and politicians can not handle one dollar of these bills unless they are 
placed in their hands by the owners of them. 

It is impossible to see how such a system can be made use of for political 
ends. 

This plan has many decided advantages over the present expedient of 
treasury notes. It makes it for the direct interest of every bank and 
banker to keep the United States stocks above par. It also puts upon the 
banks, and not upon the Government, the redemption of the circulation, 
the Government only acting as trustee in selling the deposited stocks in 
case the bank fails to redeem. 

A permanent national debt of sufficient amount for these purposes, which 
is a band of union, a guaranty for peace, and a daily convenience and 
blessing to all, will have no terrors for a people whose interests have been 
the sport of fluctuations in exchange as ours have for the last ten years. 
Very respectfully, your obedient servant, 

O. B. Potter, 
495 Broadway, New York. 

New York, August ig, 1861. 

Potter's full name was Orlando Bronson Potter. He 
published in 1875 a pamphlet entitled "Plan for appre- 
ciating the national bank notes to the value of coins with- 
out diminishing the volume of the currency," by O. B. 
Potter; also, his "Plan of the national-bank currency 
based upon, and secured by, the national stocks;" sub- 
mitted to Secretary Chase August 14, 1861. New York: 
Brown & Hewitt, printers, 30 Frankfort street, 1875. 
The date given in the title of the pamphlet for the sub- 
mission to Mr. Chase differs from the apparent date of the 
letter already quoted, the one being August 14, the other 
August 19. It is not important which is correct. A 
second pamphlet containing this plan was printed by 
Potter in 1883. Its title was "The national currency; 
its origin. Compliments of O. B. Potter, New York, " 

43 



National Banking System 

etc., 1883. There is nothing in it of interest in view of 
what has already been given. 

NUMEROUS SUGGESTIONS. 

Hon. J. R. Doolittle, United States Senator from Wis- 
consin, wrote from Chicago, a September 13, 1861, sug- 
gesting that the West was in need of treasury notes and 
recommending that the circulation of banks below the 
$20 notes be taxed out of existence and the place supplied 
permanently by treasury notes. 

Hon. Simeon Nash, of Gallipolis, urged Mr. Chase on the 
17th of September, i86i, a to receive bank notes from sub- 
scribers to the popular loan. To this Mr. Chase replied 
on the 26th of September, in a long letter the gist of which 
is contained in one sentence: "At any rate until Con- 
gress shall decide otherwise, I must execute the law as it 
exists, and receive and pay out only coin and Government 
notes. " 

William Gunckel, a native Buckeye, wrote from Ger- 
mantown, Ohio, October 3, i86i, a announcing the first 
arrival of the $20 United States Treasury notes. " Many 
persons," he said, "called to see them, and with glad 
hearts rejoiced at the event. " John W. Caldwell, of Cin- 
cinnati, on the 2 2d of October, wrote that he wanted the 
entire national debt to be put in circulation in the form of 
money. 

S. M. Felton wrote November 9, 1861, from the office 
of the Philadelphia, Wilmington and Baltimore Railroad, 
in Philadelphia , a offering to make as much use as was 

a MS. Chase Letters, Library of Congress. 
49 



National Monetary Commission 

possible of treasury notes in paying off the employees of 
the road. They could hardly be adopted to the full extent 
at once. The president of the Pennsylvania road and the 
president of the Philadelphia and Reading road would 
also cooperate in a similar way. 

PAMPHLET BY ELEAZAR LORD. 

In chronological sequence we may at this point glance 
at a pamphlet entitled "A letter on (the) national 
currency, addressed to the Secretary of the Treasury, " 
which is dated November 22, 1861, and the authorship 
of which is attributed to Eleazar Lord. He makes the 
following suggestion: "Let the Treasury Department 
(or a bureau under the responsibility of the Secretary) 
be authorized to propose to the existing banks through- 
out the country, and to new banking companies, to 
invest their capital at once or gradually, and in part or 
wholly, in national stock (which when due is redeemable 
in specie) having twenty or more years to run; to deposit 
the said stock with the department as security for cir- 
culating notes to a like amount." He ventures to think 
that his suggestion "will in some degree tally with your 
own views and reflections." 

ADVICE, CONGRATULATIONS, AND CRITICISM. 

Joseph Medill wrote from Chicago, November 25, 1861, 6 
urging the circulation of the demand notes as a national 
currency and the taxation of the "debt factories," as 
he termed the banks, whose notes he denominated "het- 

a Published in New York in 1861, see p. 8. 

& MS. Chase papers, Pennsylvania Historical Society. 

50 



National Banking System 

erogeneous rags." These familiar phrases we have met 
with in the Chicago Tribune, probably from the pen of 
Medill himself. 

On the nth of December Alphonso Taft, of Cincinnati, 
the father of the President of the United States, wrote 
Mr. Chase, complimenting him upon his report which 
had just been submitted, and saying that if Congress 
should adopt his recommendations it would in itself 
be no inconsiderable compensation for the war. 

Mr. James Brown, of New York, wrote on the same 
day, inclosing a criticism of Mr. Chase's report. He 
seemed to think that it was expected that the Treasury 
should derive direct benefit from the notes to be fur- 
nished by the Government to the proposed national 
banks. This is shown by the title which he gives to his 
analysis, viz.: "Analysis of the report of Mr. Secretary 
Chase, so far as it relates to raising $150,000,000 by 
substituting treasury or government notes in lieu of, or 
for, the bank notes now in circulation." 

W. D. Gallagher, wrote from St. Louis, December 13, 
1 86 1, 6 commending the report and saying that many 
people thought the recommendations ought to be adopted 
and the unsafe and fraudulent local currency be utterly 
and forever driven out of circulation. 

G. W. Gorum wrote from Newark, N. J., December 
16, 1861, suggesting a plan for nationalizing banks, 
which was similar to that proposed by Secretary Chase, 
but which apparently contemplated the emission of 
the national currency to state banks to the full value of 

a MS. Chase Letters, Library of Congress. 

& MS. Chase papers, Pennsylvania Historical Society 

5i 



National Monetary Commissio 



n 



the bonds deposited with the Government, and with no 
suggestion of national incorporation. 

Hon. Amasa Walker wrote from North Brookfield ° the 
same day expressing approval of Mr. Chase's project, 
which seemed to him a noble and a beneficent one. He 
hoped Congress would give the matter careful and dis- 
passionate consideration. 

B. K. Alburtis wrote from New York, a December 17, 
1 86 1, inclosing a printed document published by him, 
in which the emission by the Government of as many 
legal-tender notes as were required to place its financial 
wants at ease was advocated and the proposition to 
drive out state issues on state stocks was opposed. 

James W. Taylor wrote from St. Paul, December 24, 
1 86 i, a calling Mr Chase's attention to a review of the 
Secretary's report written by J. J. Knox, which was 
then being published in the St. Paul Daily Press. 
Some of the material used by Mr. Knox in this review 
was also made use of in an article in Hunt's Merchant 
Magazine in January, 1862. In this discussion the 
author enumerates the objections as well as the advan- 
tages of Mr. Chase's plan, which on the whole meets with 
his approval. He is somewhat satirical when he speaks 
of the voluntary conversion of the state banks to the 
system through inducements to be offered them. "What 
these inducements are does not appear," he says, "but 
they may perhaps be found in the proposed tax act, 
where in company with distilled liquors, tobacco, car- 
riages, etc., bank notes will be seen. The fact that 

o MS. Chase Letters, Library of Congress. 
52 



National Banking System 

state bank notes would be taxed while United States 
bonds and notes would be exempt would also be. in his 
judgment, " no small inducement." 

Isidor Bush wrote from St. Louis, December 28, 1861, 
as follows: ''Your report has induced me to explain to 
my German fellow-citizens the great, lasting, and bene- 
ficial revolution in our monetary system which we may 
anticipate from the adoption by Congress of your plan 
* * *." Inclosed with this was a newspaper clip- 
ping from the Daily Democrat of December 27, 1861, 
headed "The Report of the Secretary of the Treasury. 
A Revolution in Our Monetary System." (Translated 
from the Mississippi Blatter, December 15, 1861.) The 
writer attributes the^suffering under the swindling of more 
than 1,500 banks, from more than 30 different States, 
with contradictory and ruinous banking laws, to the states 
rights doctrine, and thinks that this "revolution," as he calls 
it, must destroy the fatal mania of the sovereignty of the 
several States. He is of opinion that Mr. Chase's plan 
will be adopted, for the reason that it is the most feasible 
way to raise the loans necessary for prosecuting the war 
to a successful issue. It makes it for the interest of 
capitalists, of the money power, and of banking institu- 
tions to uphold and sustain the credit of the Government. 
It would increase the common interest for the preserva- 
tion and safety of the Union. 

John D. Martin, of Lancaster , Ohio, wrote, December 
31, 1861, advocating the indefinite emission of green- 
backs to pay government expenses. 

a MS. Chase Letters, Library of Congress. 
53 



National Monetary Commission 

treasury notes refused. 

William G. Thomas wrote from Baltimore the same 
day, saying that a five- dollar treasury note payable in 
New York had that day been refused by the Baltimore 
Gas Company, a company controlled by enlightened men 
in financial matters, who were friendly to the Govern- 
ment. He recommended the prompt emission of $300,- 
000,000 in demand notes, receivable for all public dues, 
except import duties, which should be continued to be 
paid in specie. The notes should be a legal tender. It 
should be understood that they were not to be increased 
under any circumstances. The effect would be to drive 
out of circulation the good and the worthless notes of 
state banks and possibly compel the banks to wind up. 
Meantime Mr. Chase's scheme might be put into operation. 

potter's plan adopted. 

The subject as laid before Congress by Secretary Chase 
in his report, December 1, 1861, was practically in the 
same form as that in which it had been presented for his 
consideration by Mr. Potter in his letter of the 19th of 
August, 1 861. It corresponded also with the suggestions 
in Mr. Lord's pamphlet, dated November 22, 1861, of 
which it must be said that the quoted remark to the effect 
that the author thought that his suggestions tallied with 
Mr. Chase's opinions indicates clearly that the project 
then presented by him could not be considered novel, and 
perhaps was not original. He was, in other words, bring- 
ing to the Secretary's attention something with which the 

a MS. Chase Letters, Library of Congress. 
54 



National Banking System 

Secretary was already familiar. Mr. Gorum's proposi- 
tion, submitted December 16, 1861, differs so little from 
that incorporated in the finance report that the suggestion 
naturally arises, Had the writer read that report ? All of 
these proposals were foimded upon the use of existing state 
institutions as mediums for distributing a national cur- 
rency secured by government bonds. 

MR. SPAULDING PREPARES A BIU,. 

At this time, according to Hon. K. G. Spaulding, Mr. 
Chase had not prepared any bill incorporating his views. 
In an address, in 1876, to the Bankers' Association, en- 
titled by Mr. Spaulding ' ' One hundred years of progress 
in the business of banking," he narrated at some length 
his connection with the bill which was ultimately intro- 
duced in the House in consequence of the recommenda- 
tion of the Secretary. The report of the Secretary was 
referred, he said, to the subcommittee of Ways and 
Means, of which he was chairman, the other members 
being Mr. Hooper, of Massachusetts, and Mr. Corning, of 
New York. Mr. Chase, when asked for a bill incorporat- 
ing his recommendations, requested Mr. Spaulding to pre- 
pare one. Such a bill, Mr. Spaulding said, was prepared 
by him during the holidays in December, 1861, of which 
200 hundred copies were printed for the use of the Com- 
mittee of Ways and Means. In proof of which, Mr. 
Spaulding then quoted from the report of Hon. J.J. Knox, 
comptroller in the year 1876, a statement incorporated 
therein, which corroborated his assertion. At this meeting 
of the Bankers' Association Mr. Spaulding exhibited a 



55 



National Monetary Commission 

copy of the bill to his audience. When he published his 
History of the Legal Tender Paper Money, etc. , he repeated 
this statement as to his connection with the framing of the 
bill, and added that he then sent to Governor Cornell 
for a copy of the New York currency act. He further 
announced in this work that he had still in his possession 
several copies of his bill. Other matters intervened in 
Congress, and he did not introduce the bill in the House, 
but left it for future consideration. The suspension of 
the banks on the 28th of December made their notes 
uncurrent, and under these circumstances Mr. Spaulding 
not only dropped the national-bank question, but he 
introduced into the House of Representatives the legal- 
tender act, which for a time monopolized his attention. 
This act became a law February 25, 1862. 

MR. HOOPER INTRODUCES A BILL. 

The banking bill being thus hung up in the Ways and 
Means Committee, the matter was taken up by Mr. Hooper, 
and July 11, 1862, he introduced in the House a bill to 
provide for a "National currency secured by a pledge of 
United States stocks," etc. On the 16th, after meeting 
with some opposition, he secured the passage of a resolu- 
tion authorizing the printing of 5,000 copies of his bill. 
It is this bill with which any study of the national banking 
system has to do, for although the law which was passed 
the next February after this was known as the Sherman 
act, it was in fact the Hooper bill with a few changes, and 
it was probably introduced in the Senate, because Thad- 
deus Stevens, of the Ways and Means Committee, had re- 
ported on the 3d of August in the House against the bill. 

56 



National Banking System 

It may indeed be said to have been in substance the 
Spaulding bill as well, for Spaulding says in his " History 
of the Legal Tender Paper Money," etc., that the bill in- 
troduced by Mr. Sherman was his own bill, except that it 
had been altered and amended in several important par- 
ticulars. There were 61 sections in the original bill and 
65 in the Sherman act. Of these, the sixty-second, which 
was an added section, is the most remarkable. The origi- 
nal bill was drawn with the intention of bringing the 
emission of national currency under national control, and 
provision therefore was made for the organization under 
the law of institutions which desired to emit notes accord- 
ing to its terms. Section 62 provides that any existing 
bank at the date of the passage of the act, being the holder 
of United States bonds to the extent of 50 per cent of its 
stock, could transfer the bonds or any part of them to 
the Treasurer and receive circulating notes to the extent 
of 80 per cent of the amount of the bonds. 

SILAS M. STlLWElvIv TAKES A HAND. 

There is in the Boston Public Library a pamphlet 
entitled " Private History of the Origin and Purpose of the 
National Banking Law and System of Organized Credits 
for the United States, with Comments by the Author. 
New York, 1879." Attached to the volume is a manu- 
script letter addressed to Robert C. Winthrop, in which 
Mr. Silas M. Stilwell says that " this letter "—the pamphlet 
is in the form of a letter — " was called for by Mr. Buckner, 
in consequence of claims of authorship by several persons 
since the death of Mr. Chase." 



57 



National Monetary Commission 

The pamphlet itself is dated " New York City, April .20, 
1879," and is addressed to Hon. A. H. Buckner, chair- 
man of the Committee on Banking and Currency, Wash- 
ington, D. C. 

The author, after a few paragraphs by way of introduc- 
tion, says: "As a reply to your third question, 'Who is 
the author of the national banking law? ' I send you a slip 
from the New York Graphic, which will also explain to you 
why, with a weight of years pressing upon me, I still con- 
tinue to defend and advocate this great and unequaled 
credit system." 

MR. JORDAN PREPARES A BILL. 

[Special dispatch to the Graphic] 

Washington, September 21 , 1878. 
I called yesterday upon Edward Jordan, the confidential friend of 
Mr. Chase, late Chief Justice. When Mr. Chase became Secretary of the 
Treasury in 1861 he invited Mr. Jordan to become Solicitor of the Treasury. 
Mr. Jordan occupied this office and remained at the head of the law bureau 
of the Treasury until 1869. I had been told that Mr. Jordan was the author 
of the original bill introduced into Congress, under which the national 
banking system was organized. After a few words of introduction I asked 
him to give me the history of the origin of the national banking law. 
Said he, in reply: " Late in the year 1862, December, I am quite sure, Secre- 
tary Chase introduced me to Silas M. Stilwell, of New York City, asking that 
I would hear Mr. Stilwell' s views in regard to a national system of banking 
to supersede the state banking system * * * . Mr. Stilwell spent two 
or three days in elaborating his views to me, as he had previously with Judge 
Chase, and concluded by submitting a draft or bill embodying them * * * 
I was directed by Judge Chase to prepare a bill to be submitted to the 
Committee of Ways and Means of the House of Representatives- In 
accordance with Judge Chase's directions, I prepared a bill, using Mr. Stil- 
well's materials." 

NOTES EXPLANATORY OF THE SYSTEM. 

Mr. Stilwell then goes on in the pamphlet, as follows: 
"Early in the winter of 1862 and 1863 I visited Wash- 
ington," following which comes a long and confused 

58 



National Banking System 

account of his relations with Mr. Chase and the advice 
which he gave him, in the course of which he refers to the 
legal-tender act in such a way as to show that he has post- 
dated his visit to Washington one year in this account. 
Perhaps in this he was misled by the date given by Mr. 
Jordan in the account in the Graphic, but so far as his 
own story is concerned the error is manifest. While it is 
obvious from his own language that he made this error of 
date, there is other evidence to be found that it is an 
error in a letter from Stilwell, dated at the Treasury De- 
partment, January 24, 1862, offering his services to James 
Gallatin as a correspondent. In the course of this 
account he describes the preparation by himself of a 
pamphlet treating of the financial situation, at Mr. Chase's 
request, of which 30,000 copies were printed by the Public 
Printer for distribution. This doubtless was "Notes 
explanatory of the system of national finance and cur- 
rency proposed by the Secretary of the Treasury. Wash- 
ington 1 86 1 : Printed at the Government Printing Office." 
This pamphlet is attributed to Stilwell in "Appletons' 
Cyclopaedia," and is evidently the one referred to in the 
St. Paul Press of December 29, 1861, in the following: 
"A pamphlet has appeared from the Government Print- 
ing Office, understood to be from the pen of Silas M. Stil- 
well, of New York, which discusses Secretary Chase's 
plan for a system of national finance and currency, and 
the additional propositions now made by the Secretary 
to enable all existing banks and associations to become 
national institutions. In the opinion of the writer 

a MS. Chase Letters, Library of Congress. 
59 



National Monetary C ommis s to 



n 



* * * the Secretary's plan will furnish for the nation 
all the credit and money that a prudent administration 
ought to require to conclude the war with an honorable 
peace * * *." 

The pamphlet develops the idea that the use of national 
stocks as a fund for the security of a national currency 
will at the same time create a demand for them on the 
part of investors, touches slightly on the argument of the 
value of the uniform currency which would thereby 
accrue, and sets forth the advantages to be obtained from 
the banks being available as government depositories. 
The patriotism of readers is also invoked in an appeal 
"To banks, bank officers, stockholders, farmers, me- 
chanics, manufacturers, merchants, laborers, lawyers, phy- 
sicians, clergymen, and every other class and calling 

* * * ." Apparently Mr. Stilwell felt called upon to 
publish still another paper on this subject, for there is such 
a publication in the Boston Public Library, bound in 
with "Notes Explanatory," etc. It is dated January 6, 
1862, and winds up with the statement that "The object 
of this paper is to make plain what many did not under- 
stand from the pamphlet." This was apparently to 
show that "the object to be obtained by this system of 
banking is to provide a plan that will create a demand 
for bonds and thus fund, in this way, as many demand 
notes as possible." While it could not be expected that 
the banks should at once become heavy purchasers, the 
author thought that when they did others would follow 
them, probably fast enough to furnish the treasury with 
$250,000,000. 



60 



National Banking System 

THE STILWELL, JORDAN, SPAULDING, HOOPER BILL. 

That Mr. Stilwell's services were invoked by the Treas- 
ury Department for work in connection with the prepara- 
tion of a bill to carry out the intentions of the Secretary- 
is beyond dispute, and in all probability his work is to be 
found incorporated in the bill known as the Hooper bill. 
If Mr. Stilwell's date is carried back one year, it necessarily 
carries back Mr. Jordan's with it, since they cooperated, 
and this again agrees with the date that Mr. Spaulding 
sets for the time devoted by himself to the preparation of 
the bill. When Mr. Spaulding asserts that he prepared 
the bill, he does not necessarily mean that he himself did 
all the work in that connection. He means merely that 
he was devoting his attention to the subject, guiding and 
controlling others in shaping the proposed legislation 
according to his views, and it is quite reasonable for him 
to assume as his work that in which other government 
officials participated and in which he merely cooperated 
as an overseer and director. His claim for participation 
in the authorship of the bill is not inconsistent with his 
permitting it to slumber in the hands of the subcommittee 
after he discovered that Thaddeus Stevens, chairman of 
the committee, was utterly opposed to it. It is not 
unlikely then that the Stilwell bill, the Jordan bill, the 
Spaulding bill, the Hooper bill, and the Sherman bill are 
practically one and the same thing. In that event we 
should have one who was familiar with the state legisla- 
tion under which an experience of a similar character to 
the proposed scheme had been successfully prosecuted, 
furnishing from this knowledge the necessary outlines for 

61 



^ 



\ 



National Monetary Commission 

a bill; another representing the Treasury Department, 
safeguarding the provisions affecting the custody of the 
bonds and the control of the emissions ; and a third conver- 
sant with the methods of the House, watching the details 
to see that they were in sympathy with the customs of 
that body. Mr. Spaulding records his abandonment of 
the bill in its early stages in the committee. It was then 
taken up by Mr. Hooper, and notwithstanding Mr. Spauld- 
ing's statement that it embodied Hooper's views, it is 
not unlikely, now that he had become sponsor for the 
bill, that he added to the work of so many hands a few 
finishing touches of his own. The amendments and 
changes afterwards made that mark the differences between 
the House and the Senate bill were most of them unques- 
tionably made at the demand of Mr. Sherman, as we 
shall see later. 

OPPOSITION OF BANKS. 

If we recur to Mr. Chase's words when he submitted to 
Congress his plan for nationalizing the banks of the 
country, we shall see that he entertained "the hope that 
the plan now submitted if adopted " * * * will 
1 ' impart such value and stability to government securi- 
ties that it will not be difficult to obtain the additional 
loans required for the service of the current and the suc- 
ceeding year at fixed and reasonable rates * * *." 
This was, of course, dependent upon the immediate pas- 
sage of the proposed legislation and the voluntary accept- 
ance by existing banks of the opportunity to reorganize 
under its terms. The opposition in Congress was so 
powerful that it was evident that nothing could be accom- 

62 



National Banking System 

plished for the time being, and as this opposition was 
doubtless inspired by the banks the corollary was evident 
that the banks themselves would not cooperate with the 
Secretary in securing for him the benefits which he thought 
would accrue from their support of his project. The 
"bond market," which up to this point had been a con- 
spicuous feature of his advocacy of the scheme, though 
not necessarily his principal motive, became from that 
time of less importance. The strength of the "uniform 
currency ' ' motive was also dependent upon the coopera- 
tion of the banks, and the acceptance by the country of 
the greenbacks furnished a partial equivalent for such a 
currency, with, however, the disadvantage that the infla- 
tion of the currency by the Government produced a 
corresponding inflation on the part of the banks. 

MORE LETTERS OF ADVICE AND SYMPATHY. 

The submission of Mr. Chase's scheme to the public 
brought forth comments and advice from many quarters. 
Mr. James Brown, who had already written once from 
New York, wrote from Brooklyn on the ist of January, 
1862, and inclosed a plan prepared by him for the 
emission of government notes. The proposed plan 
involved a reserve fund and a sinking fund, and was ac- 
companied with an argument against Mr. Chase's scheme. 

S. Sturgis & Sons, of Chicago, on the 20th of January, 
1862/ said that demand treasury notes were what were 
needed. The people of the Northwest were with the 
Government and against the banks. They suggested that 

a MS. Chase Letters, Library of Congress. 
29582—10 5 63 



National M on et ar y Commission 

all banks of issue should be taxed 10 per cent per annum 
on their circulation, and they called attention to the fact 
that government credit was suffering by delay. 

The Chicago Tribune of February 5, 1862, quoted 
from the special correspondence of R. J. Walker in the 
New York Times, the following exposition of the great 
evil of inflation arising from the uncontrolled power of 
banks to emit bills. "Necessity and sound policy alike 
demand the adoption of Mr. Chase's well-guarded, free 
banking system, as a means of averting impending peril 
* * *. " " The first inquiry of the reader , doubtless , is how 
will the adoption of such a plan sustain the public credit ? 
I answer, by restricting the amount of paper currency 
afloat, keeping it entirely within control of the Government, 
correcting the present great redundancy and inflation, and 
checking the disastrous competition between local banks 
on the one hand and the Treasury on the other, in the 
matter of putting afloat their respective paper * * *." 

E. Littell, Boston, February 7, 1862,° in the belief that 
the hope of banks absorbing stocks as security for notes 
to be furnished by the Government had now passed, 
recurred to his plan for creating a circulation of gold 
drafts for interest money on the various mints, the same 
to be drawn in denominational sums for $5, $10, etc. 

Enoch T. Carson, of Cincinnati, wrote February 9, 
i862, a expressing sympathy with Mr. Chase, and saying 
that the people were with him, believing that it was a 
fight between the Government and the banks, and that 
Mr. Chase represented the people in the struggle. 

°MS. Chase Letters, Library of Congress. 
64 



National Banking System 

On the ioth of February, 1862, Mr. Chase addressed a 
letter to Hon. William P. Fessenden, a in which he said 
that while it was desirable to keep down the interest 
charges by furnishing at that time as many government 
notes in small denominations as were needed for circula- 
tion, still he thought that the real relief from the situation 
was to be found in a banking system organized on the 
basis of specie payments, secured by deposits of govern- 
ment bonds and suitable legislation * * *. "In my 
judgment," he says, "a 5 per cent bond, capable of being 
used as a basis of circulation, would be worth more in the 
market than a 6 per cent bond without that capacity." 

Joseph Medill, of the "Chicago Tribune," wrote again, 
May 30, 1862, 6 urging the emission by the Government of 
small bills and the severe taxation of banks. 

John C. Hamilton, June 27, 1862, 6 addressed Mr. Chase 
from the Saratoga Springs, calling attention to the oppo- 
sition of the superintendent of the banking department of 
the State of New York to Mr. Chase's scheme, because of 
the loss that would take place on the sale of state stocks 
held by the state banks as security for their issues. He 
hoped that Mr. Chase's plan might ignore the state banks 
by a general authorization under national authority. 

October 7, 1862/ Mr. Chase wrote to John Bigelow 
inclosing a copy of the proposed bill and explaining its 
probable effects. He called attention to the fact that the 

a Treasury Department files, correspondence from the Treasury Depart- 
ment to individual Members of Congress, May 14, 1859, to February 28, 
1866. 

& MS. Chase papers, Pennsylvania Historical Society. 

c An Account of the Private Life and Public Services of Salmon Portland 
Chase, Cincinnati, 1874, by Robert Bruce Warden, pp. 502-503. 

65 



National Monetary C ommis s io 



n 



circulation of government notes had "not displaced that 
of banks as yet, but on the contrary had actually caused 
it to increase." His plan would "bring to the support of 
the public credit the whole banking interest of the coun- 
try." It would open "a gradually enlarged market for 
the securities of the Government, and thus sustain their 
credit at the highest point." If the war was prosecuted 
actively and expenditures were economical ' ' the adoption 
of the system would furnish all the money that is needed 
at reasonable rates * * *." 

November 13, 1862, Hon. Samuel Hooper inclosed two 
articles from the London Globe, written by Mr. Latham, 
the governor of the Bank of England, which he had 
caused to be republished because they gave the most 
candid and clear statement he had seen of the condition 
of the currency here and the character of the measure 
proposed. The articles themselves are unfortunately 
missing, but they can be easily identified with two com- 
munications to the Boston Evening Transcript, one 
November 8, the other November 14, 1862. They 
touch but lightly on the subject that we are specially 
considering. 

Morris Ketchum wrote from New York, November 
29, 1862/ urging Mr. Chase to go ahead with his banking 
plan, which would provide a resting place for a large 
amount of government securities and furnish the country 
with a stable and uniform currency. Great caution 
would, however, be necessary in making the change, and 
it would be well to relieve the money market by a further 

a MS. Chase papers, Pennsylvania Historical Society. 
66 



National Banking System 

emission of greenbacks. Without an easy money market 
the change would be accompanied by great distress. It 
should of course, as far as possible, be voluntary. 

FINANCE REPORT DECEMBER, 1 862. 

In December, 1862, Mr. Chase issued his second annual 
report as Secretary of the Treasury. He set forth, in clear 
language, the necessity of abandoning a gold basis, forced 
upon him by the increasing discount of loans which he 
sought to negotiate. The absolute unreliability of the 
bank notes in circulation was disclosed in impressive 
language, and he dwelt upon the fact that owing to 
their freedom from control the banks were enabled to 
meet every demand upon them by new emissions of notes, 
thus increasing their depreciation with every loan that 
might be effected through them. This had led him to 
prefer to make use of government notes alone. While 
thus expressing preference for these notes over those of 
the banks, he repeated the opinion expressed in his pre- 
vious report that a circulation furnished by the Gov- 
ernment, but issued by banking associations organized 
under a general act of Congress was to be preferred to 
either. Such a circulation, uniform in general character- 
istics and amply secured as to prompt convertibility by 
national bonds deposited in the Treasury, would unite, 
in his judgment, more elements of soundness and utility 
than can be combined in any other. 

"The central idea," he said, "of the proposed measure 
is the establishment of one sound uniform circulation 
of equal value throughout the country upon the founda- 
tion of national credit combined with private capital. 

67 



National M on et ar y Commission 

The organization proposed would require within a very 
few years, for deposit as security for circulation, bonds 
of the United States to an amount not less than 
$250,000,000 * * *. Should Congress see fit to restrict 
the privilege of deposit to the bonds known as five- 
twenties, authorized by the act of the last session, the 
demand would soon promptly absorb all of that descrip- 
tion already issued * * *." 

He then went on to say that it was not in immediate 
results that the value of this support would be only or 
chiefly seen. He looked for a future support of the 
prices of bonds through the continuous demand thus 
created for them. 

"Another advantage to be derived from such associa- 
tions would be found in the convenient agencies which 
they would furnish for the deposit of public moneys," 
and he added that inasmuch as their bills would be re- 
ceived for all dues, except customs, such agencies would 
" constitute the best and safest depositories of the revenue 
derived from such receipts." 

"Tittle direct aid," he said, "is, however, to be ex- 
pected from this plan during the present, nor very 
much perhaps during the next year * * * ." "The 
immediate advantage to the Government will be found 
in the market created for bonds, and the support thereby 
given to the national credit. The more general advan- 
tages which have been described must attend the gradual 
organization of banking associations when the national 
circulation furnished to them shall become the established 
and sole national circulation of the country." 



68 



National Banking System 

HOW THE REPORT WAS RECEIVED. 

Hon. Samuel H. Walley wrote Mr. Chase from Boston 
December 9, 1862,° saying that this banking scheme 
will give no aid now, but would not be objectionable 
with some alterations. 

On the 10th of December, 1862, b Mr. Chase wrote 
John J. Cisco, asking him if he could not procure from 
leading financial gentlemen who favored the national 
banking plan some expression of their views which 
should be addressed to the members of the financial com- 
mittees. "I am firmly convinced," he said, "that the 
adoption or nonadoption of this plan is the turning 
point of credit or discredit. If it be adopted, the finances 
can be placed on a firm and satisfactory footing. If it 
be not adopted, the finances are delivered rudderless 
to be tossed helplessly on the gulf of irredeemable cur- 
rency by conflicting gusts of opinion until the inevitable 
wreck." Just one month after this letter was sent there 
was a meeting of financiers at the residence of Mr. Cisco, 
possibly the outcome of it. Apparently it did not 
accomplish much, for the "New York Journal of Com- 
merce" of Monday, the 12th of January, satirically ob- 
served that the meeting "might have been a success as 
a social gathering, but we fear has not contributed largely 
toward the replenishing of the treasury." 

December 13, 1862/ Mr. Chase wrote Joseph Medill, 
saying: "Give us the plan and I can borrow. Without 

a MS. Chase Letters, Library of Congress. 
6 MS. Chase papers, Pennsylvania Historical Society, 
c MS. Chase papers, Pennsylvania Historical Society. A part of this 
letter is printed in Schucker's Life of Chase. 

69 



National Monetary Commission 

it I can not borrow except at enormous sacrifices. Give 
me the plan and I can carry on the Government to the 
close of the war, I hope, successfully. Without it there 
may be success, but I don't see it * * *. " 

In a letter to William C. Bryant, bearing date the 
same day,° Mr. Chase said that his support of a national 
system of banking association might be justified under 
the circumstances even if the plan we're intrinsically 
defective. "The support of the demand which will be 
created, " he said, "by the enactment of the plan for bonds 
will enable the Government to borrow at reasonable 
rates. Without that I see nothing less than the Serbo- 
nian bog before me for our finances." 

Hon. Robert J. Walker, on the 19th of December, 1862, 
issued a brochure, entitled "Review of our Finances and 
of the Report of Hon. S. P. Chase." In this he said: 
"We are upon the verge of ruin. We are hanging over 
the gulf of an irredeemable paper system. * * * 
Never did any representative assembly encounter so 
fearful a responsibility as the present Congress. * * * 
What can Congress do? They can consider at once 
this great financial question uninterrupted by any other 
measure until there shall have been action complete 
and decisive. ' * * * If my words be too bold, let 
them be attributed to my profound conviction that the 
American Union is in extreme peril and that its downfall 
involves the final catastrophe of our country and of our 
race. * * * The bill organizing the new system 
presented in Congress by Mr. Hooper last summer is 

c A Biography of William Cullen Bryant; with Extracts from his Private 
Correspondence. New York, 1883. Vol. II, p. 185. 

70 



National Banking System 

drawn with great ability, and it is much to be deplored 
that (with some amendments) it had not then become a 
law, when it would have been much more easily set in 
operation and would have saved hundreds of millions of 
dollars to the Government." 

On the 23d of December Mr. Chase wrote Hon. Thaddeus 
Stevens, chairman of the Committee of Ways and Means, 
urging the favorable consideration of the banking act. 
"Under existing legislation," he added, "it is next to 
impossible to collect the internal revenue in lawful money 
of the United States; and I see no ground for belief that 
the funds necessary for the pay of the army and the prose- 
cution of the war can be in any way provided without 
the support to public credit expected from that measure." 

MR. CHASE SEEKS FOR HELP. 

Oberholtzer states that Mr. Chase actively sought the 
support of Jay Cooke for this bill, b and quotes from Cooke's 
"Memoirs" a statement that he and his brother Henry 
after carefully examining a copy of the bill, which had 
been submitted to their consideration about this time, 
decided to support the measure. They thereupon began 
a campaign with the press and made personal appeals to 
Senators and Representatives. 

January 7, 1863,° while the bill was still pending, Mr. 
Chase wrote a letter to Mr. Fessenden relating to financial 

a Treasury Department files. Letters from the department to committees 
of Congress. February i, i860, to May 20, 1864. 

& Jay Cooke, Financier of the Civil War, by Ellis Paxson Oberholtzer. 
Philadelphia, 1907, Vol. I, pp. 331, 332. 

c Treasury Department, letters from the Department to committees of 
Congress, February 1, i860, to May 20, 1864. 

7i 



National Monetary Commissio 



n 



legislation in which he said, "No measure, in my judg- 
ment, will meet the necessities of the occasion and prove 
adequate to the provision of the great sums required for 
the suppression of the rebellion which does not include a 
firm support to public credit through the establishment 
of a uniform national circulation secured by bonds of the 
United States. " 

On the 17th of January, 1863,° President Lincoln took 
advantage of a message to Congress on financial matters 
to add a few words in favor of "a uniform currency in 
which taxes, subscriptions to loans, and all other dues, 
as well as all private dues" might be paid. Such a cur- 
rency could be furnished by banking associations organ- 
ized under a general act of Congress. The pledge of 
United States bonds to secure circulation would facilitate 
loans. He urged the early passage of the bill. 

PRELIMINARY DISCUSSION IN THE HOUSE. 

Mr. Hooper had, as we have already seen, introduced 
in the House July 11, 1862, "A bill to provide a national 
currency secured by pledge of United States stocks," etc. 
On the 8th of January, 1863, he secured unanimous con- 
sent to introduce "A bill to provide a national currency 
secured by pledge of United States stocks and to provide 
for the circulation and redemption thereof." The details 
of the new bill are not known, but it is quite probable 
that parliamentary reasons dictated this movement. One 
clew to the bill that was probably presented at that time is 
to be found in the title to the pamphlet containing the 

a Richardson's Messages, Vol. 6, pp. 149, 150. 



72 



National Banking System 

Hooper bill. It contains the following words: "Sub- 
mitted to Congress in December, 1861, and December, 
1862." There was no separate discussion of the bill at 
that time but it was taken up in the House by several of 
the speakers in connection with the "bill to provide ways 
and means," etc. 

Mr. Morrill a opposed the bill It was directed against 
the country banks. It would force the state bonds 
already deposited against circulation on the market in 
competition with United States securities. 

Mr. Gurley, 6 of Ohio, thought the legal-tender notes fur- 
nished a uniform currency and regarded as serious the 
throwing on the market of the bonds now deposited as 
security for the circulation of state banks. 

If Mr. Sherman was the sponsor for the bill in the Sen- 
ate, Mr. Hooper was its backer in the House. While he 
had neither the influence nor the power of Mr. Sherman, 
he was greatly respected as a man of conservative opin- 
ions, whose judgment upon financial matters was likely to 
be sound, and Mr. Chase was fortunate in securing him as 
the principal advocate for the passage of the bill. 

Mr. Hooper c said: "If this banking law is rejected the 
Government has no control over the depreciation of the 
currency, for just in proportion as the amount of the 
United States notes is increased the bank circulation, 
which is redeemable in those notes, will be augmented, 
and both will depreciate together." 

a Congressional Globe, January 13, 1863, pp. 295-297. 
& Congressional Globe, January 15, 1863, pp 341, 342. 
« Congressional Globe, January 19, 1863, pp. 384-387. 



73 



National Monetary Commission 

The value of the banks as fiscal agents, where deposits 
could be made, against which drafts could be drawn by 
the Treasury in the ordinary course of business was dwelt 
upon. The uncontrollable nature of the currency situa- 
tion now furnished the rebellion one of its main supports. 
"The revolted States," he said, "could never have in- 
augurated this rebellion without the currency of state 
bank notes for circulation, and we must deprive them 
hereafter of this ready aid for treason." 

"Another of the important benefits which the Govern- 
ment would derive from this system of national banks 
would be the amount of United States stock which would 
be absorbed to be used for its circulation." The sale to 
the banks would affect the whole market, and it would be 
sound policy to avail of it. 

Mr Walker a was not ready to give his assent to such a 
system. He thought the Secretary of the Treasury had 
admitted that it would not do much good.* 

Mr. Lovejoy c believed in taxing banks out of existence. 

Hon. Samuel H. Walley wrote from Boston/ on the 
17th of January, 1863, disclaiming hostility to the bank- 
ing act and saying that there would be perfect willingness 
to give it a trial if the bill were amended in some respects. 
"Whenever our affairs are in better condition," he says, 
"you will find no difficulty in summoning aid to your 
bank scheme. " 

a Congressional Globe, January 19, 1863, p 392. 

&A reference to a speech of Mr Walker's prepared at a later date for 
delivery in the House, in which he supported the bill, will be found chrono- 
logically arranged under date of May, 1863 

c Congressional Globe, January 22, 1863, p. 460. 

<*MS. Chase Letters, Library of Congress. 

74 



National Banking System 

January 22, 1863, Mr. Chase wrote Charles A. Hecksher 
of New York, to the effect that the trouble in the situa- 
tion was the divorce of the Government from control of 
the currency. If the currency were under regulation of 
the Government and were receivable for taxes, then the 
banking associations could become depositories. " I have 
no doubt," he added, "that the bonds would be so 
strengthened that loans would be comparatively easy and 
the great evils of an exceedingly redundant currency 
averted * * *. " 

SENATOR SHERMAN'S AID SOLICITED. 

January 23, 1863, Henry D. Cooke wrote 6 "in the 
strictest confidence" to Jay Cooke, "Governor C. ex- 
pressed the greatest anxiety that Sherman should take 
hold of his bank bill and asked me to use my influence 
with him to do so. I had an interview with S. last even- 
ing and again to-day. Sherman has not positively prom- 
ised to champion the bill, but from his talk to-day I think 
he will do it. I am sure he will do so if Governor C. will 
consent to two slight modifications, viz, restricting the 
charter (which at present is perpetual) to twenty years, 
to prevent inflation limiting the amount of circulation to 
be issued and apportion it among the States. I will get a 
definite answer from Sherman to-morrow, and meanwhile 
am to see the governor about S's proposed modifica- 
tions. " Since all of these limitations and amendments 

a The Life and Public Services of Salmon Portland Chase, by J. W. 
Schuckers. New York, 1874, pp. 384, 385. 

& Oberholtzer's Cooke, the Financier of the Civil War, Vol. I, pp. 332, 333. 



75 



National Monetary Commission 

are to be found in the act as passed, it is evident that Mr. 
Sherman carried his point. 

On the 27th of January, 1863,® Mr. Chase addressed 
a letter to William P. Mellen, then at Cincinnati, in which, 
speaking of the passage of the bills, he said, "With it, 
success is possible and probable. Without it, failure is 
probable, if not certain. " 

January 30, 1863, & Hon. W. P. Fessenden wrote as 
chairman of the Senate Finance committee to Secretary 
Chase asking him to give his views to the committee on 
the House bill ' ' to provide ways and means to support the 
Government, " with the request that he consider the bill 
as a distinct measure, entirely disconnected from the bill 
submitted by Mr. Sherman "to provide a national cur- 
rency." Mr. Chase replied February 2, c saying that it 
was, in his judgment, "impracticable to frame any meas- 
ure which will work satisfactorily in the absence of proper 
regulation of the currency. " 

Mr. Chase received from Horace Greeley on the 30th 
of January, 1863,^ a letter approving his plan for bank- 
ing and national securities. Mr. Greeley added that he did 
not believe any measure could be adopted by Congress 
that could help the credit of the Government at any toler- 
able standard if the war were not ended within the next 
six months. He believed we were on the very brink of a 

a Schucker's Life of Chase, p. 286. 

& Treasury Department Files. Senate Committee on Finance to Treas- 
ury Department, 1862. W. P. Fessenden, chairman; etc. 

c Treasury Department. Correspondence from the Treasury Depart- 
ment to committees of Congress, February i, i860, to May 20, 1864. 

d MS. Chase papers, Pennsylvania Historical Society. 



76 



National Banking System 

financial collapse and a copperhead revolution, and that we 
must have crushing victories or a ruinous peace very soon. 

February 5, 1863, Mr. Chase, in a letter to T. C. Day, 
showed signs of impatience at the prolonged opposition 
of the banks. He wrote as follows: "The tax on bank 
notes will, I think, be imposed. The demand for it from 
the people is, happily, too strong to be resisted. With 
this and the banking system, which will root out the 
heterogeneous local banks, and give us a uniform currency. 
* * * I hope we shall get along * * *." 

The Philadelphia Bulletin summed up the advantages 
to ensue from the passage of the banking bill, on the 7th 
of February, 1863, in the following order: (1) A uniform 
currency; (2) fiscal agencies in every city; (3) the support 
of government credit by sales of bonds to banks and to the 
people; (4) the facilities thereby afforded for returning to 
specie payments; (5) the curtailment of the circulation 
of the present bank notes. 

MR. SHERMAN TAKES HOLD IN EARNEST. 

February 7, John Sherman wrote saying that it was 
vital that the bank bill be taken up before the supply bill, 
saying: " I will not guarantee the passage of the bank bill 
if Fessenden insists upon first passing the supply bill." 

February 10, 1863" Thomas W. Olcott wrote from the 
Mechanics and Farmers Bank, Albany, saying that a friend 
had said to him in a letter that Governor Chase's bank bill 
with Mr. Olcott's amendments, is likely to become a law. 
The writer then went on : " With the proposed amendments 

a MS. Chase papers, Pennsylvania Historical Society. 

77 



National Monetary Commission 

it will be a good working bill, decidedly more encouraging 
to the formation of new associations, and the more so from 
leaving all existing institutions undisturbed, thus securing 
a general and cordial wish for success." He then prophe- 
sied that the bank act could not afford relief to the treas- 
ury for a long time. Nor would there be enough new 
organizations to act speedily as agents and depositories. 

The Sherman act had four more sections than the Hooper 
bill, some of these referred to the subject specifically men- 
tioned by Mr. Olcott, when he said that with the proposed 
amendments the bill would be a good one. Other than 
this there was no change in the bill to which the language 
used by him could have applied. In a letter of later date 
Mr. Olcott refers to the fact that his name had been sug- 
gested by Mr. Chase to Mr. Lincoln, for comptroller of the 
currency. 

On February i2, a after Sherman's speech, which was 
delivered February ioth, Henry D. Cooke wrote: "It will 
be a great triumph, Jay, and one to which we have con- 
tributed more than any other living men. The bank bill 
had been repudiated by the House, and was without a 
sponsor in the Senate, and was thus virtually dead and 
buried when I induced Sherman to take hold of it, and 
we went to work with the newspapers." 

Whether Henry Cooke's influence over Senator Sher- 
man had the full force which he attributed to it in the 
foregoing letter, or whether in common with the Cookes 
themselves; with other bankers; with legislators in both 
houses, and with the nation at large, the impressive 

a Oberholtzer's, Jay Cooke, pp. 332-333. 

78 



National Banking System 

nature of Mr. Chase's demand for the passage of this 
bill, the support that he received from the President 
and the entire Cabinet, and the chaotic condition of the 
finances out of which it was hoped that through this bill 
some reform could be effected, were the true causes for 
Mr. Sherman's conversion, can not be stated with cer- 
tainty. That Mr. Cooke's opinion, representing as he 
did important banking interests which had heretofore 
been opposed to the bill, should have had some weight 
with Mr. Sherman is extremely probable. That Mr. 
Sherman's advocacy of the bill was coincident with 
Cooke's claim is also clear. That Mr. Sherman's speech 
was powerful and effective is undoubtedly true, and to 
him more perhaps than to any other person Mr. Chase 
owed the successful passage of the bill at this time. 

THE DEBATE. 

Mr. Sherman advocated the bill because it would furnish 
a uniform currency ; ° because it would create a market for 
bonds ; because through the sale of bonds thus effected the 
nation would be consolidated; because it would furnish 
depositories for public funds, and because the bills could 
be used in payment of taxes. Greenbacks he considered 
not suitable for the desired uniform currency, because 
they were liable to inflation. The more of them that 
were put out, the greater had been the emissions of 
state banks. "The consequence has been," he said, 
"that while the Government has been issuing its paper 
money, some of the banks have also been inflating the 

« Congressional Globe, February 10, 1863, p. 843, et seq. 
29582 — 10 6 79 



National Monetary Commission 

currency by issuing paper money on the basis of United 
States money * * *. There is no way to check this 
* * * except by one uniform currency system." 
What benefit, he asked, does the United States obtain 
from this system? "The first benefit is, there is a 
market furnished for the bonds of the United States. 
Then banks must furnish 10 per cent more of the bonds 
of the United States than they receive in paper money. 
This at once if the full amount is issued, which I do not 
anticipate within a year, will furnish a market for 
$330,000,000 of bonds, and we know very well by the 
laws of supply and demand that where a demand is made 
for a given article the demand extends far beyond the 
particular want." He thought the passage of the bill 
would "promote a sentiment of nationality," the want 
of which was one of the evils of the times. 

The fact that the banks could be made use of as depos- 
itories was another advantage to be derived from the 
passage of the bill. Now "every collector is bound to 
take what paper money he gets, and hold it in his hands 
subject to all risks. He dare not under our laws deposit 
it with banks. He runs all the risk of fire and accident, 
and all the money he may have on hand he is responsible 
for. He has no safe where he can deposit it. The 
United States Government does not furnish a safe." 
Under the new laws the banks could receive and care 
for such deposits. 

Senator Pomeroy said a that in Kansas they had no cur- 
rency of their own, and in consequence they sometimes 

a Congressional Globe, February io, 1863, p. 850. 
80 



National Banking System 

had to pay for exchange to pay debts in the East " 2 per 
cent, and 5 per cent." He would vote for it because it 
would give more uniformity of currency. 

Senator Henderson would, if he had the power, blot out 
of existence every bank in the country, and would not 
himself turn to a new system of banks for relief, but he 
would vote for this plan, at this time, because it was sup- 
ported by the Secretary of the Treasury and the entire 
Cabinet as a measure essential to give character and 
standing to the bonds of the United States. 

Senator Doolittle thought that the practical way to 
subdue the inflation then going on was for the Govern- 
ment "to dominate, master, and control the currency of 
this country."* He would "sustain the measure because 
the friends of the administration look upon it as one of 
those measures which will enable the Government to go 
on under the great and pressing necessities of the hour." 

The bill had been held up in the House by opposition 
from quarters which the supporters of the bill could not 
overcome, but the passage of the similar bill introduced 
in the Senate by Sherman brought the subject before the 
Representatives in a new form, and the same pressure 
that had secured the support of Sherman operated suc- 
cessfully in the House. The debate there was brief. 

FINAL DEBATE IN THE HOUSE. 

Hon. E. G. Spaulding c would vote for the bill, although 
he did not look for any considerable relief therefrom for 

a Congressional Globe, February 10, 1863, p. 851. 
& Congressional Globe, February 11, 1863, p. 882. 
c Congressional Globe, February 19, 1863, p. 11 14. 

81 



National Monetary Commission 

the next two or three years. If wisely administered, he 
thought the system would be of great benefit to the peo- 
ple and a reliable support to the Government in the 
future. 

In the course of the debate it was plain that the charac- 
ter of the financial situation was such that some who had 
hitherto felt the necessity of supporting the state banks, 
realized that opposition to the Secretary of the Treasury 
at this time was full of meaning, and might bring disas- 
trous consequences. For instance, Reuben E. Fenton, a 
of New York, said that in giving his support to the bill he 
should run counter to his previous convictions. 

Stephen Baker, & of New York, pointed out that it was 
not claimed that the passage of the bill would be of any 
service to the Treasury within the space of two years. 

John B. Alley, of Massachusetts, c thought that a uniform 
currency would be an inestimable blessing scarcely less 
valuable than the preservation of the Union itself. The 
present tendency of inflation was toward repudiation. 
Any bill that would check this was not hostile to the 
banks. 

THE HOOPER BIIX AND THE SHERMAN ACT. 

The passage of the bill by the House on the 20th of 
February, 1863, was followed by the President's approval 
on the 25 th, and there was now an opportunity to test how 
far the system would in actual operation assist the Secre- 

o Congressional Globe, February 19, 1863, p. 11 17. 
& Congressional Globe, February 19, 1863, p. 1141. 
c Congressional Globe, February 20, 1863, p. 1146. 



82 



National Banking System 

tary in handling the great financial problems, the solution 
of which was then forced upon him. 

We may as well pause here for a moment in order to 
take note of the changes which had been made in the bill 
since its original introduction in the House. 

In the Hooper bill, a method was specified by which 
any five or more persons could form an association which 
had the privilege of using a common seal, which could 
adopt a name by which it could have succession and could 
complain and defend in any court of law or equity as fully 
as natural persons. Thus, and thus only, could associa- 
tions be formed, no special provision being made for the 
nationalization of state banks. The functions and privi- 
leges conferred by the act upon the associations organized 
under it were in all essentials those of corporations, but 
the associations were nowhere declared to be corporate 
bodies. The declaration, however, that they could ' 'sue and 
be sued" ''as fully as natural persons" involved this idea. 

In section 30 there was a provision for winding up asso- 
ciations and the expression "all the corporate powers shall 
cease" is there used. In section 37 the phrase "any other 
incorporated company" is used in connection with the 
word association. In a few of the sections the associa- 
tions are spoken of as "banks and banking associations," 
but as a rule they are called simply "associations," and it 
is obvious that whoever drafted the bill intended to apply 
that name to them and to exclude any other designation. 

TAXATION. 

In the matter of taxation the Hooper bill contemplated 
taxing the circulation of state banks and associations, on 

83 



National Monetary C ommis s io 



n 



the basis of 2 per cent per annum payable in equal semi- 
annual installments. The tax on the associations was not 
laid on the circulation itself, but on the bonds deposited 
to secure the circulation, and inasmuch as only 90 per 
cent of the market value of the bonds could be furnished 
in bills, and in no event could that 90 per cent exceed the 
par value of the bonds, it is evident that there might have 
been a discrimination against the associations in this 
method of taxation. It was a curious way to undertake 
to raise the tax, and was suggested probably because the 
treasurer could simply hold back the amount when he 
paid the interest money on the bonds. 

The Senate was the stronghold of the banks. It would 
have been impossible to have secured the passage of any 
bill in that body which seemed in any way to be unjust 
toward the state banks. The capitalists who owned these 
banks had rallied to the support of the Government, and 
their aid in the summer of 1861 had been of incalculable 
service. It is not surprising to find, therefore, in the Sher- 
man act, that the clause in the Hooper bill which brought 
the state banks under the 2 per cent per annum tax on 
circulation had disappeared, while the associations were 
still held liable for such a tax, the same being laid this 
time directly on the circulation and not on the bonds 
deposited to secure it. In this form, with the associations 
subject to the circulation tax and the state banks exempt, 
the law went into effect. This exemption did not last 
however, for more than a week. On the 3d of March, 
1863, it was provided in the seventh section of an "Act 
to provide ways and means for the support of the Govern- 



84 



National Banking System 

ment," that all banks should pay i per cent per annum 
for each half year upon the average amount of their circu- 
lation. From this tax, however, there was a sliding scale 
of exemptions, running from 90 per cent of the circulation 
in the case of banks having not over $100,000 of capital to 
25 per cent in the case of the capital being over $2,000,000. 
On the circulation thus exempt a tax was laid of one- 
half of 1 per cent for each half year. This rate of taxation 
was made applicable to associations organized under the 
"Act to provide a national currency secured by a pledge 
of United States bonds," etc., approved February 25, 
1863, in order that government taxation of associations 
and state banks might be equalized. A further tax of 
one-eighth of 1 per cent for each half year was laid in the 
act of March 3, 1863, on deposits in the hands of banks, 
associations, individuals, or corporations. 

There is no hint as to the origin of the proposition for 
the individual liability of stockholders. The clause impos- 
ing this liability is not to be found in the Hooper bill. It 
was added to the twelfth section of the Sherman act. 

SHERMAN'S CHANGES. 

The suggestions mentioned by Henry D. Cooke in his 
letter to his brother Jay, that Sherman wished the amount 
of the possible emissions of national currency limited, the 
term of the certificate of the associations fixed, and the 
right to establish associations distributed among the States 
with suitable apportionment, found embodiment in the 
new bill in the seventeenth section, which was an entirely 
new and intrusive section. On the other hand, the 



85 



National Monet ary Commission 

thirty-first section in the Hooper bill, which related to the 
voluntary winding up of associations and provided under 
certain circumstances that they might receive back the 
deposited bonds when 90 per cent of the circulation had 
been redeemed, was stricken out and has no place in the 
later bill. Providence, St. Louis, and Chicago were added 
to the cities specifically mentioned in the bill. 

SECTIONS DROPPED AND SECTIONS ADDED. 

There were other changes of minor significance, but 
these represent the more important differences between 
the Hooper bill and the Sherman act, so far as the text 
of the original bill can be used for comparison. There 
were, however, 61 sections in the Hooper bill. In the 
Sherman act a new section had been added and one of 
the sections of the Hooper bill was dropped out. The 
greater part of the sections of the two bills correspond in 
number and in the subject treated in the respective sec- 
tions. The last section of the Hooper bill, which was 
perfunctory, was not renewed, but in its place a para- 
graph was inserted providing for the nationalization of 
such existing state banks as should desire to avail them- 
selves of the privilege. The sixty-second section has been 
referred to heretofore. It made provision for the emission 
of national currency to state banks under certain condi- 
tions, and the sixty-third and sixty-fourth sections dealt 
with the subject of banks of this description. The sixty- 
fifth and last section was a reservation on the part of Con- 
gress to alter, amend, or repeal the act at any time. 



86 



National Banking System 

The opposition of the state banks had been continuous 
from the outset. When Hooper secured the passage of 
the order to print, it was realized that the only immediate 
result to come from that order was the distribution of 
copies of the bill among an interested public who might 
read, ponder, and perhaps be convinced. Through the 
convictions of their constituents a realizing sense of the 
opportunity which was being lost might be brought home 
to Congressmen. 

THE MILITARY SITUATION INFLUENCES VOTES. 

The first draft of the bill was probably submitted to the 
Ways and Means Committee in January, 1 862 , and was hung 
up there in the subcommittee until Mr. Hooper took the 
matter up in July and introduced in the House his bill, 
presumably much the same as the one already in the hands 
of the subcommittee. Even then some obstructions were 
thrown in the way of the passage of the routine order to 
print, and the subsequent opposition of Thaddeus Stevens 
prevented further progress in that body. The summer of 
1862 had greatly changed the views of the people as to the 
period which might be set for the duration of the war. 
The failure of McClellan's peninsular campaign, followed 
by the disasters in the immediate vicinity of Washington, 
had brought with them a realizing sense of the magnitude 
of the task which our Government had undertaken, and 
had taught the people that the disadvantage of operating 
upon the circumference of a circle greatly reduced the nat- 
ural advantages derived from our superior control of men 
and materials. How long it would take for this supe- 



87 



National Monetary Commission 

riority to effect its work could not 'be foretold, but the 
hopefulness of a speedy termination of the war had given 
place to grim determination to prosecute it to the bitter 
end. The battle of Antietam had settled for the time 
being the question of an invasion of Pennsylvania, and the 
changeable campaigns, under different generals, which 
resulted in Fredericksburg and Chancellorsville, with the 
alternate hopes and fears aroused by the situation, was 
being conducted when the national bank act was brought 
to the consideration of Congress through its introduction 
in the Senate by Mr. Sherman. His brilliant advocacy of 
its merits and the ultimatum pronounced by Mr. Chase that 
without its passage he was powerless had led to a reluctant 
adoption in the Senate. How Mr. Chase's ultimatum was 
interpreted will be seen from the following extract from 
the New York World of January 12, 1863: "It is 
now given out that he [Chase] will certainly retire from the 
Cabinet unless his banking scheme is indorsed by Con- 
gress." This was stating the case stronger perhaps than 
the circumstances warranted, but at any rate it is an indi- 
cation of the situation. 

OPINIONS AFTER THE PASSAGE OF THE BIU,. 

In following the debate in Congress, as we have done, 
down to the passage of the bill, we have reached a point 
which relieves us of the necessity of further examination 
of the correspondence of Mr. Chase in our search for hints 
as to the evolution of the system, if we accept the passage 
of the original bill as the true birth of the system, but it 
may be profitable to analyze the opinions of a few selected 



88 



National Banking System 

correspondents and authors in order to see what was the 
effect of passing events upon their opinions as to the motives 
which had led to the adoption of the bill. So, also, Mr. 
Chase's retrospective views as set forth in his replies to let- 
ters of congratulation, sympathy, and advice may con- 
tribute something to aid us in forming an opinion on this 
subject. Moreover, the amendatory act of 1864 repealed 
the original bill, thus furnishing a new birthday for the sys- 
tem, and perhaps compelling us to follow the matter a 
little further than we already have done. 

After the passage of the bill, Mr. Chase wrote, on Feb- 
ruary 21, 1863, to Hon. Benjamin Kggleston ° setting 
down the benefits to accrue from the bill in the following 
order: "The strengthening of the public credit; the 
strengthening of the bond of union; a safe currency for 
the masses; a uniform money, with some of which in 
his pockets a traveler who leaves San Francisco can 
pay for his breakfast on the Isthmus, for his dinner in 
New York, and for his supper in Liverpool." 

A copy of a letter from Samuel Hooper to Governor 
Andrew of Massachusetts, dated Boston, March 25, 1863, 
is to be found among the Chase papers in possession of 
the Pennsylvania Historical Society. Mr. Hooper urges 
the governor to secure legislation facilitating the con- 
version of Massachusetts banks into national banks, 
saying that Mr. Chase does not overstate the importance 
of the national banking act to the General Government. 

March 30, 1863, Mr. Chase wrote Messrs. W. H. Aspin- 
wall and J. M. Forbes, a who were in London at that time, 

° MS. Chase papers, Pennsylvania Historical Society. 
89 



National Monetary Commission 

having authority to negotiate a loan for the Government, 
saying that he had received applications for the authori- 
zation of associations under the national banking law 
from most of the principal towns in the loyal States, 
including Portland on the Atlantic and San Francisco on 
the Pacific. "You will readily perceive from this state- 
ment," he added, "that I do not regard it as a matter of 
very great importance that you use the authority given 
you to negotiate a loan of $50,000,000 in Europe. It is 
my undoubting belief that the 6 per cent bonds of the 
United States are now worth intrinsically a large premium 
in gold." 

In May, 1863, Hon. Amasa Walker published in the 
Banker's Magazine some remarks which he had 
prepared for a speech in the House of Representatives, 
but which he was prevented from delivering through 
the application of the previous question. After having 
shown that the proposed currency was full of imperfec- 
tions, that at best it was a " feeble and imperfect currency," 
he, nevertheless, says he prefers it "to that which it 
is designed to supersede; because it will be uniformly 
current everywhere; because there is a tax on it; be- 
cause it will reduce the danger of counterfeits; because 
it will aid the Government in financial operations, and 
because it will identify the interests of our moneyed 
institutions with the credit of the Government." 

It has already been stated that the understanding 
was that interest on United States bonds was to be paid 
in gold, and that the principal of the long-term bonds 

a Banker's Magazine, vol. 12 (new series), pp. 833-43. 
90 



National Banking System 

stood upon the same ground, but that current obligations 
would be met in currency. On the 5th of August, 1863, 
George Harrington, Assistant Treasurer, officially an- 
nounced to Fiske & Hatch, New York, that such was the 
policy of the Government and authorized them to sell five- 
twenties on that basis. This letter was published by E. G. 
Spaulding in his " History of the Legal Tender Paper 
Money," etc. 

MR. CHASE SPEAKS IN OHIO AND IN INDIANA. 

In October, 1863, Mr. Chase went home to vote in 
the election held in Ohio, Tuesday, October 13. He 
made numerous speeches from the platform of his car 
during his trip, and at Cincinnati he delivered a long 
address. A delegation sent from Indianapolis persuaded 
him to visit that place, and there, too, he made a speech 
of some importance. All of these speeches were reported. 
From the Cincinnati and Indianapolis speeches I quote 
a few passages. 

The Cincinnati address was delivered at Mozart Hall, 
and in it his main theme was a uniform currency. He 
said: " I have been doing something in my humble way to 
promote the welfare and secure the permanence of the 
reconstituted Republic. It seemed to me that if labor 
was henceforth to have fair wages, it was highly desir- 
able to have a medium of payment, a substantial, per- 
manent, and uniform medium, so that labor should not 
be cheated of its rewards. So I set myself to work to 
devise a uniform currency for the whole country." 

a From a pamphlet in Harvard University Library. Apparently from 
some newspaper. 

9i 



National Monetary Commission 

In the address at Indianapolis he discussed briefly 
the emission of greenbacks and the bestowal upon them 
of the legal-tender function, and then went on as fol- 
lows: "But to perpetuate the national currency and 
to avoid the disturbance of capital already invested in 
banks under state laws, another step was necessary. I 
therefore recommended and Congress adopted the na- 
tional banking system. I think the capital of the country 
employed in furnishing circulation will be organized under 
this system and that, when in full operation, we shall 
have no note circulating in this country which does not 
bear the national imprint and guaranty. When this is 
done, and only when this is done, labor will be sure to 
have its just reward." In this speech Mr. Chase did 
not refer to the creation of a market for bonds or to the 
improvement of the credit of the Government as a mo- 
tive for the foundation of the national banks. 

DIFFERENT VIEWS AS TO THE PROGRESS OF THE SYSTEM. 

On the 2d of November, Samuel Hooper wrote Mr. 
Chase from Boston a inclosing with comments, a slip 
cut from the London Examiner, which he thought might 
interest Mr. Chase as expressing the opinions of an intel- 
ligent and experienced writer on financial subjects. 
He closed his letter with the following expression of his 
disappointment at the situation: "I do not like having 
only small banks organized under the new law, and 
regret that no large banks are yet organized in the prin- 
cipal commercial cities to be made depositories of public 
money, as it seems to me very desirable; though I doubt 

a MS. Chase papers, Pennsylvania Historical Society. 
92 



National Banking System 

if any large banks here or at New York would receive 
deposits of the public money on the conditions that I 
understand to be prescribed by the Treasury Depart- 
ment * * * ." 

November 19, 1863, Mr. Chase wrote "Mr. Harring- 
ton" (presumably George Harrington, his assistant), 
saying: "The national banking scheme is working well. 
About 130 banks have been organized. The organiza- 
tion of one in San Francisco is expected, and the one in 
New Orleans is making good progress. It will not be 
long before they exist in all parts of this country, and 
then it will be an easy matter to bring all the present 
capital of the state banks into it." 

FINANCE REPORT DECEMBER, 1 863. 

In the finance report, submitted in December, 1863, 
Mr. Chase referred to what he had already said about the 
national banking system and added: "Except through 
such a system no sure way is seen to the complete and 
permanent establishment of a uniform currency; and a 
system of national banking fair to all and secure for all 
can only be safely and firmly established by making use 
of a portion of the national debt as security for the national 
currency * * *." Further on the Secretary said 
that he had "heretofore expressed the opinion that 
whatever may be the true degree in which the currency 
of the country is affected by a bank-note circulation 
issued without national sanction and by corporations 
independent of national authority and not receivable for 

a MS. Chase papers, Pennsylvania Historical Society. 
93 



National Monetary Commission 

national dues, it can not be questioned that in some 
similar degree the negotiation of national loans must be 
prejudiced and their value to the national finances 
diminished. This opinion is confirmed by observation 
and experience. Impelled therefore by a profound 
sense of the present necessity of a national currency to 
the successful prosecution of the war against rebellion, 
and of its utility at all times in protecting labor, cheap- 
ening exchanges, facilitating travel, and increasing the 
safety of all business transactions, and at the same time 
unwilling to urge even salutary and necessary reforms 
in such a way as needlessly to disturb existing conditions 
or impair the value of existing investments of capital, 
the Secretary recommended in two successive reports 
the authorization of national banking associations, to 
which the capital of the corporations now issuing notes 
for circulation might be transferred, with advantage to 
the parties in interest as well as to the general public. 
The sanction of Congress was given to these views at the 
last session, and the simple assurance thus given that 
henceforth the country is to have a national currency 
secured by a pledge of national bonds, and the belief 
that this currency will at no distant day take the place of 
the heterogeneous corporate currency which has hitherto 
filled the channels of circulation at once inspired faith 
in the securities of the Government and more than any 
other one cause enabled the Secretary to provide for 
the prompt payment of the soldiers and the public 
creditors." 



94 



National Banking S y s t e 



m 



" If the policy thus indicated shall be fairly and judi- 
cially pursued and proper measures adopted to induce the 
conversion at the earliest practicable period of the bank cor- 
porations of the States into national banking associations 
and of the corporate circulation into national currency, th e 
Secretary believes, and, as he thinks, not without good 
ground, that all the money needed for prompt payment 
of troops and for the most vigorous prosecution of the war 
can be obtained by loan on reasonable terms * * *." 

In this report the number of banks organized under 
the act was stated to have been 66 on the ist of October, 
1863. We have seen that Mr. Chase reported to Mr. 
Harrington on the 19th of November that there were 
130. Small as their numbers were in comparison with the 
number of banks organized under state laws, the insignifi- 
cance of the number was not the real source for the disap- 
pointment which Mr. Chase must then have felt at the slow 
movement of his scheme. "I do not like' having only 
small banks organized under the law, " wrote Mr. Hooper 
in his letter of the 2d of November, and when he said that, 
he sounded the true cause for regret and alarm. It was 
easy enough to secure a few banks of numerical designa- 
tions in the principal cities, but their capitalization was 
not large, and the men who furnished that capital were 
not leading financiers. 

ATTACK OF THE NEW YORK CLEARING HOUSE. 

The new organizations were attacked on this and other 

grounds by a committee of the New York clearing house 

on the 28th of November, 1863. This committee was 

composed of John E. Williams, president of the Metro- 

29582—10 7 95 






National Monetary Commission 

politan Bank of New York, and John L. Bveritt . The prep- 
aration of the report was attributed to Mr. Williams. 
It was submitted to the clearing house at a meeting on 
the 5th of December, 1863, and was accepted and ordered 
to be printed and distributed. The following clause of the 
report is of interest in this connection \ a "It must have 
been observed by all that the applications for banks under 
this law, though numerous, are for small amounts, many 
of only $50,000 or $60,000 capital. Your committee 
know of very few which are designed to do a legitimate 
banking business. There may be others, but from the 
small amount of capital of more than a hundred of them, 
and the localities of several, your committee strongly sus- 
pect them of being intended for banks of circulation only, 
not regular banks for deposits and discounts, but what are 
known in our Western States by the expressive term 
'Wildcat banks."' Mr. Chase had written Mr. Harring- 
ton on the 19th of November, as we have just seen, to the 
effect that when the system had been established through- 
out the country it would be "an easy matter to bring all 
the present capital of the state banks into it." How this 
was to be accomplished he did not, at this time, suggest. 

TAXATION URGED. 

The war cry of Medill in the Chicago Tribune had been 
"Tax the banks out of existence." Lovejoy echoed it in 
the House of Representatives. Mr. Chandler in the Sen- 
ate, said, "I would vote an absolute prohibition tax. I 

a Report on the National Bank Currency Act; its Defects and its Effects. 
New York, 1863, p. 7. 



96 



National Banking System 

would take possession of it [the circulation] during the 
continuance of this war, and say to the banks, ' You shall 
not occupy it until peace is restored.'" In July, 1861, 
Mr. Chase included bank notes with ale, beer, and tobacco, 
as suitable objects for taxation under the then existing 
circumstances. In his report in December, 1861, he had 
said, " A moderate tax on bank notes will relieve the nation 
from the competition of local circulation." On the 5th 
of February, 1863, he wrote: "The tax on bank notes will, 
I think, be imposed. The demand for it from the people 
is happily too strong to be resisted." It is possible that 
Mr. Chase referred in this letter to the fact that in the Sher- 
man act the provision made in the Hooper bill for the 
taxation of the circulation of state banks was stricken out, 
and he may have had in mind the possible restoration of 
this clause. The strength of his language, however, would 
seem to indicate the taxation out of existence of that 
circulation, a measure which came in 1866. 

January 2, 1864, Mr. J. W. Schuckers, Mr. Chase's secre- 
tary, wrote to Mr. Hooper inclosing certain memoranda, 
which Secretary Chase had dictated. The Secretary had 
gone home, and Mr. Schuckers forwarded the dictation 
without waiting to incorporate it into a letter to be signed 
by Mr. Chase. He (Mr. Chase) said: "In my judgment 
sufficient stress has not been laid in arguments for the 
national banking system, upon the absolute necessity 
of a currency in which the transactions of the Government 

a Treasury Department files, correspondence from the department to 
individual Members of Congress, May 14, 1859, to February 28, 1866. 
MS Chase papers, Pennsylvania Historical Society, but without date and 
without signature — in a letter book. 



97 



National Monetary Commission 

as well as those of the people can be conducted." He 
thought if such a system had been inaugurated promptly 
it would have been entirely practicable to have negotiated 
all the loans to carry on the war without suspending specie 
payments. 

January 23, i864, a writing to Thomas W. Olcott, the 
Secretary said that the banking act was not regarded by 
him as perfect, but he was clear that the "currency of a 
State should be supplied only by the nation, either directly 
or by institutions organized under national law." 

On the 30th Mr. Chase wrote to Joseph Medill a saying: 
"I have recommended the tax you favor." 

February 4, 1864, writing to Pliny Freeman, of New 
York, Mr. Chase said: 6 "If I can succeed in giving a 
permanent, uniform currency to the country, and carry 
the nation financially through the war without failure, I 
shall be satisfied, even 'though obliged to forego much 
that I think desirable to the solidity and perfection of 
the financial system. ' " 

In March, 1864, the following outspoken opinion is to 
be found in a letter from Mr. Chase to Hon. Edward D. 
Mansfield: c "We must also have an exclusive national 
currency. The state bank currency must be driven out 
of existence." Writing to Charles A. Hecksher, March 
7, 1864,° Mr. Chase intimated that his main purpose in 
urging the passage of the national banking act was to 
secure a uniform currency. He said: "Then I seized 

a MS. Chase papers, Pennsylvania Historical Society. 
& Warden's Life of Chase, p. 571. 

c MS. Chase papers, Pennsylvania'Historical Society, the day of the month 
not filled in. 

98 



National Banking System 

the occasion to introduce and establish a national cur- 
rency * * *. To aid in accomplishing these objects, 
I called the national banking system into existence." 

PRAISE FOR HOOPER AND R. J. WALKER. 

March 22, 1864, Mr. Chase wrote J. T. Trowbridge as 
follows : a " I had already urged on Congress the adoption 
of a system of national currency to be furnished 
by associations organized under national authority 
and secured by the pledge of national securities. Con- 
gress was not yet prepared for so decided a measure as 
this * * *." 

"A majority of both the House and the Senate Finan- 
cial Committees were incredulous or hostile. Only 
Mr. Hooper, of Massachusetts, a gentleman whose sound 
judgment and large knowledge of financial subjects gave 
great and deserved weight to his opinions, encouraged 
me by open support; and the most he could do was to 
obtain leave to bring in a bill authorizing a national 
banking system and providing for a national currency, 
and procure an order for the printing of it. Out of Con- 
gress Robert J. Walker, distinguished by his brilliant 
administration of the treasury when himself Secretary 
and by his great ability, gave the plan the sanction of 
his approval." 

March 31, 1864, the Secretary wrote the Rev. Joshua 
Levitt, a New York, saying: "If the judicious and patri- 
otic men of business to whom you refer would devote 
their energies to inducing Congress to tax the local bank 

a MS. Chase papers, Pennsylvania Historical Society. 
99 



National Monetary Commission 

circulation out of existence, they would be much better 
employed than in suggesting large sacrifices of govern- 
ment securities in order to create vacuums to be filled 
by the expansion of the circulation. " 

AN EXCLUSIVE NATIONAL CURRENCY. 

Writing to Horace Greeley, April 6, 1864, Mr. Chase 
said: "It is in vain for me to strive to maintain the 
public credit, and still more vain to think of keeping 
down the price of gold unless we can have an exclusive 
national currency, and it is vain to hope for an ex- 
clusive national currency unless we can have such 
amendments of the National* Banking System as will 
facilitate the conversion of the state banks into national 
banks * * *." 

April 15, 1864, the Secretary addressed a letter to the 
President in which he said: "Next to taxation and 
retrenchment a uniform national currency is most impor- 
tant. This can be accomplished only through the passage 
of the national banking law now before congress * * *." 

May 9, 1864, Mr. Chase wrote to S. DeWitt Blood- 
good, 6 New York, saying: "The national banking system 
is a necessary and, indeed, an inevitable step in our finan- 
cial progress to a more perfect political union. Had 
such a system existed specie payments would never have 
been stopped. " 

May 27, 1864, Mr. Chase, writing to Richard Smith, 
esq., Gazette, Cincinnati, said: "I think then that the 
state bank currency should be withdrawn and that no 

°MS. Chase papers, Pennsylvania Historical Society. 
& Schucker's I^ife of Chase, pp. 402, 403. 



National Banking System 

currency should be allowed except the national. So 
far as >this consists of legal tenders, their issue and circu- 
lation are a direct gain to the country by a saving of 
interest, and if not issued in excess the benefit would be 
unmixed. So far as it consists of national banks, it is 
recommended by the indispensable necessity of such 
institutions to make a uniform currency permanent, by 
the benefits derived from the support afforded by them 
to the credit of the Government and by the convenience 
and utility of these institutions to the Government. " 

A NEW BIRTHDAY FOR THE SYSTEM. 

It has been already suggested that the repeal of the 
Sherman act in 1864 might be considered as a new 
birthday for the national banking system. The act 
by which this was accomplished bore the same title 
as the Sherman act and was passed June 3, 1864. By 
its terms the Sherman act was absolutely repealed 
except that organizations under that act enjoyed all the 
rights and were subject to all the duties imposed by the 
new act. In the new act the associations were declared 
to be bodies corporate and power was given them to use 
a corporate seal. While the bulk of the Sherman act 
was made use of in the new act, the whole of it was rear- 
ranged and much new matter was introduced. There 
are in the Treasury Department two blank books con- 
taining printed copies of the Sherman act cut up into 
sections and pasted in according to the proposed rear- 
rangement, together with sections from the "Act to 
provide ways and means. " Accompanying these are 



National Monetary Commission 

manuscript drafts of proposed additions, alterations, and 
amendments where the changes were too great to -desig- 
nate upon the pasted slips themselves. The whole 
reveals the great amount of labor involved in bringing 
forth this act. 

HOSTILE TAXATION OF STATE BANKS. 

The subject of taxes which throughout this discussion 
was evidently one which was full of possible contention 
was treated in much the same manner as it was left by 
Congress in the spring of the previous year. The act 
dealt with associations alone. One-half of i per cent 
on the circulation was to be paid each half year ; one- 
fourth of i per cent was to be paid each half year on 
the average amount of deposits, and, in addition, one- 
fourth of i per cent each half year on the amount of the 
capital stock beyond the amount invested in government 
bonds. Shares in such associations were made taxable 
as personal property under state authority at the place 
where the association was located and not elsewhere. 

The legislation on this subject up to this time did not 
bring about the voluntary nationalization of the state 
banks which was hoped for and was expected from it, 
but on the 3d of March, 1865, an act was passed which 
sounded the death knell of the state banks, in so far as 
they were dependent upon their circulation for their 
existence. A tax of 10 per cent was laid upon the amount 
of notes of state banks which should be paid out by any 
bank or banking association after the 1st day of July, 
1866. This gave the state banks a little over a year to 



National Banking System 

get under cover. The necessity for this legislation be- 
comes apparent if we consider that up to the 15th of 
November, 1864, there had been organized only 584 
banks, having a capital of $81,961,450. Less than a year 
afterwards, on the 1st of October, 1865, there were 1,566 
associations, capitalized at $276,219,450. 

MR. CHASE WRITES W. C. BRYANT. 

In seeking for the predominant motive in Mr. Chase's 
mind in connection with the evolution and development 
of the national-banking system we have culled from his 
correspondence while Secretary of the Treasury a number 
of quotations which, as a rule, seem to indicate that the 
securing of a uniform currency was the uppermost thought 
at this time. This is especially prominent after the pas- 
sage of the Sherman act. Curiously enough the last 
letter that we have from his pen bearing upon the subject 
while he was still Secretary, which was written to William 
C. Bryant, is capable of another interpretation. The 
letter was dated June 30, 1 864, after Mr. Chase had resigned, 
but before he had received notice of the acceptance of 
his resignation. "My grand object has been," he said, 
"first to provide for the vast demands of the war, and 
second the substitution of a national bank-note cur- 
rency for a state bank-note currency, and through the 
last, resumption of specie payments, and so permanence 
and strength in the financial order * * *." At first 
thought this might seem to be a recognition of the pre- 
dominance in Mr. Chase's mind of the function of the 

a Schucker's Life of Chase, p. 405. 
103 



National Monetary Commission 

banking system in providing a permanent market for 
national securities, but more mature consideration will 
probably lead to the conclusion that the Secretary was 
speaking of the wider field of his strenuous labors in 
meeting the obligations of the Government, rather than 
of any particular method by which this might have been 
accomplished. Even the furnishing a uniform currency 
was ''second" to providing funds to pay the army, and 
the navy, and to meet current expenditures. 

Passing from the contemporaneous correspondence of 
the Secretary it may be of some interest to note the 
impressions concerning the subject that we are consid- 
ering made upon a few authors who have in a general 
way devoted some attention to the affairs of this period 
or have directed their investigations specially to the 
career of Mr. Chase. 

THE CONCLUSIONS OP AUTHORS. 

Horace White in "Money and Banking," says: "In 
1 86 1, Mr. Chase, the Secretary of the Treasury, conceived 
the plan of making the bank-note circulation of the country 
a means of enlarging the sales of government securities." 
* * * "Among the advantages to be gained," he said, 
"would be uniformity of style, uniformity of goodness, 
and a large demand for government securities. Of these 
three, the last was not the most important, although it 
then seemed so." 

Albert Bushnell Hart, in his life of Chase, 5 said: "In 
Chase's mind a great advantage of the scheme was the 

a Money and Banking, by Horace White, p. 372. 
& Hart's Life of Chase, pp. 282, 283. 

104 



National Banking System 

demand thus created for government bonds, and the conse- 
quent relief of legal-tender notes; and it was not his fault 
that during his administration little progress was made in 
the actual accepting of United States securities as a basis 
for notes. A second consideration which Chase had always 
in mind was the national need of a currency at once uni- 
form and safe." 

George Walker, in an article entitled "The advantages 
of the national-banking system of the United States 
now in force," published in the Banker's Magazine for 
March, 1868, quotes from Mr. Chase's reports, a then says: 
" It has been alleged that his leading motive was to obtain 
a market for $200,000,000 or more of bonds, which would 
be required as a basis for the new circulation, but a careful 
perusal of his reports of 1861 and 1862 does not justify 
this conclusion." 

A letter from Jay Cooke was published in the New 
York Tribune, October 23, 1867, under title of "The 
origin of the national-banking system." It contains 
but little to help us in settling priority of motives for 
the adoption of the national banks, but the following tes- 
timony to the efficiency of the system is perhaps worthy of 
our consideration: " I am glad of this opportunity of bear- 
ing witness to the fact that not only in negotiating the first 
$514,000,000 loan of five-twenties, but more particularly 
in the subsequent negotiation of the $830,000,000 of seven- 
thirties the country was largely indebted to the national 
banks for the promptness with which the National Treasury 
was supplied with sorely needed funds * * *." 

a Banker's Magazine, Vol. XXII, pp. 681, 715. 
105 



National Monetary Commission 

THE ORDER OF THE MOTIVES. 

The completion of this review of the material at our 
command calls for an analysis of what has gone before, 
and a statement of the conclusion that has been reached 
as to the predominant motive for the urgency with which 
Mr. Chase insisted that Congress should pass the national 
banking act. The various reports of the Secretary, his 
speeches, his correspondence, the discussion in Congress, 
the newspaper articles, and the contributions to magazines 
all agree that the following were the benefits to be derived 
from the passage of the bills: A uniform currency con- 
trollable in amount by the General Government, and receiv- 
able for taxes by the Treasury ; a market for a large block 
of government securities, and an improvement of the 
national credit in consequence of the permanence of the 
demand for the securities required for use under the act ; 
the creation of a large number of institutions under national 
control widely distributed over the country, which could 
not only serve as depositories for government funds, and 
thus relieve the collectors of internal revenue and other 
government officials having custody of such funds from 
the anomalous situation in which they were placed under 
the existing law, but which could also act as the fiscal 
agents of the Treasury, and could receive subscriptions 
to loans and distribute bonds to subscribers; and, finally, 
the stimulation of the patriotism of the people which 
would arise from their closer touch with national affairs 
in consequence of their direct interest in government 
securities brought about by the popular distribution of 
the loans. 

1 06 



National Banking S y s t e 



m 



In the rehearsal of the arguments advanced in favor of 
the establishment of the national banking system, I have 
placed first the one in which the benefits to be derived 
from a uniform and controllable national currency were 
advanced. The uniformity of the currency was the point 
specially dwelt upon, but it was plain that uniformity 
could be accomplished by the Government itself through 
its own notes. The advantage that a currency furnished 
by associations under government control would have 
over notes issued directly by the Government lay in the 
fact that while the former were to be secured by the de- 
posit of national securities and were to be always subject 
to jealous oversight and control, the latter were, to quote 
the language of Mr. Chase, subject to "the temptation, 
especially great in times of pressure and danger, to issue 
notes without adequate provision for redemption." 
What that temptation amounted to no man knew better 
than he. The Government could furnish such a currency, 
but a national currency at once uniform and controllable 
could only be obtained through the national banking law. 

As we run through the various extracts from documents, 
papers, and correspondence which have been submitted 
to our consideration, we find Mr. Chase always the advo- 
cate of a uniform currency. The opinion expressed in 
his inaugural address as governor of Ohio in 1856 has the 
clear ring of conviction. Even in 1861, in enumerating 
the advantages of the proposed system, he does not put 
the improvement of the bond market first — "uniformity 
in currency," "uniformity in security," "safeguard 
against depreciation," "protection of travelers from loss 



107 



National Monetary Commission 

by exchange," "a large demand for government securi- 
ties," with certain other consequent advantages, and, 
finally, the "increased security of the Union springing 
from the common interest in its preservation, created by 
the distribution of its stocks to associations throughout 
the country * * *." 

GENERAL IMPRESSION THAT THE BOND MARKET LEADS. 

The impression that has since prevailed, and was per- 
haps most prominent in the thoughts of the general 
observer then, was that the immediate relief to be expected 
in the bond market was the argument which influenced 
opinions and votes. There are, indeed, among Mr. Chase's 
letters several which might be quoted in support of this 
view. It must be borne in mind, however, in forming an 
opinion from these that Mr. Chase may have been at the 
time developing a special phase of the subject and not 
undertaking to discuss the entire question on its merits. 
So in Congress the argument used by a speaker may have 
been that which he thought would appeal to the public, 
but not that which really produced his own convictions. 

Among the expressions of opinion as to the real ad- 
vantages to be derived from the adoption of the system 
there has been quoted one from Horace White to the effect 
that as between the several advantages rehearsed by the 
Secretary the demand for government securities was not 
the most important, although it then seemed so. Yet 
Mr. White, while distinctly stating that the bond market 
was not entitled to be regarded as the predominant 
motive, goes on to say that, as a matter of fact, it actually 



108 



National Banking System 

was. This thought is expressed as follows: "The expec- 
tation that the scheme would be a great financial aid to 
the Government was the real motive for its adoption." 

If we turn to the speech of Mr. Sherman in the Senate, 
we find that while he first enumerates the advantages of 
uniform currency he follows it up, asking the question, 
"What benefit does the United States obtain from this 
system?" And to this question he replies, "The first 
benefit is, there is a market furnished for the bonds of the 
United States." This statement that the market is the 
first benefit is significant and corroborates Mr. White's 
view 

THE PREDOMINANT MOTIVE IN MR. CHASE'S MIND. 

The language of Mr. Chase's reports relieves him from 
responsibility for Mr. Sherman's utterances. Whatever 
support of this sort was to come was future and distant. 
The uniformity of the currency, first advocated in 1856; 
placed first in the series of advantages named in the 
report of 1861; and denominated to be "the central idea 
of the proposed measure" in the report of 1861, is over 
and over again stated in Mr. Chase's correspondence 
as the great thing to be gained by the adoption of the 
system. The "enlarged demand for bonds" as time 
went on became of minor importance through the 
diminution of the relative size of the amount required 
by the banks when compared with the total of the 
government debt, but the permanent effect of this de- 
mand upon the market and the prop that would thus 
be given to the government credit became more and more 



109 



National Monetary Commission 

prominent in the appeals of the advocates of the system. 
The combination of all the advantages to be obtained 
from the adoption of Mr. Chase's scheme formed a pow- 
erful argument . The various benefits were cumulative, and 
while it is possible to separate the chain and assign a rela- 
tive measure of strength to the different links, yet it must 
be remembered that it was their union and cohesion that 
furnished the strength which secured the adoption of the 
bill. 

PROGRESSIVE BELIEF THAT THE SYSTEM STRENGTHENS 
THE UNION. 

At the outset it was stated that search for the predomi- 
nant motive which prompted the adoption of the system 
must be made in the mental operations of the man then 
in charge of the Treasury Department. The investigation 
which has been conducted includes within its scope the 
official reports, the speeches, and the correspondence of 
Mr. Chase so far as the same are at our command to-day, 
and to all intents and purposes the conclusion which has 
been reached upon this point is of such a nature that this 
review of the situation might be considered as completing 
our work. There are, however, one or two points which 
have disclosed themselves in the course of the investiga- 
tion which seem worthy of mention, but for which no suit- 
able place was found in the narrative. Hooper, for in- 
stance, coupled the uniform currency with the fiscal 
agencies and said the benefits of these are "of far more 
importance than the more direct benefit of creating a per- 
manent demand for a large amount of government bonds." 



National Banking System 

The need of depositories was plain, but by thus coupling 
this with the uniform currency on one side of the scales, 
while the benefit of the bond market was placed on the 
other, he cut us off from citing his valuable name as one 
of those who placed the uniform currency over the bond 
market as a motive, although in all probability he actually 
thought so. 

Another point which is worthy of notice is the steady 
growth of the belief in the protection which would be 
afforded from the future revolt of any portion of the 
Union against the General Government by a national 
banking system. Mr. Chase, in his report in 1861, claimed 
that increased security of that sort would come " from the 
common interest in the preservation of the Union created 
by the distribution of national stocks to associations 
throughout the country * * *." This argument ap- 
pealed to many others and cropped out from time to time. 
Thus Hooper, in a speech in the House of Representatives, 
January 19, 1863, said: "It is justly said by an eminent 
financial writer, who was once distinguished as the head of 
the Treasury Department [probably Robert J. Walker], 
that this abdication by the Government of its power to 
control the currency of the country has furnished one of 
the main supports of this rebellion." Hooper then added 
the following impressive statement: "The revolted States 
could never have inaugurated rebellion without the cur- 
rency of state-bank notes for circulation * * *. " 

Mr. Sherman expressed the point tersely when he said 
that he thought the passage of the bill would "promote a 
sentiment of nationality," the want of which was one of 

29582 — 10 8 in 



National Monetary C ommis s to 



n 



the evils of the times. Amasa Walker covered the same 
ground when he said, " It will identify the interests of our 
moneyed institutions with the credit of the Government." 
In further support of the opinion on the point of the security 
to be derived from a distribution of the securities of the 
Government, which gradually developed and gained 
strength as time went by and people pondered over these 
problems, we may close our references on this subject by 
quoting from the New York Tribune of February 3, 1863, 
the following strong expressions: "Considered, however, 
as a permanent plan, there can be no stronger argument 
in its favor than that it tends to strengthen the Union by 
closely interwoven ties of common interest in the per- 
manence and credit of the National Government." These 
remarks upon the value to the General Government of a 
system of banks emitting a uniform currency, subject to 
national control, in the way of protection against future 
outbreaks, owing to the difficulty which would arise in 
financing them, have but little bearing on the evolution 
of the system, but the growth of belief in the truth of this 
proposition is a matter of considerable interest. 

In conclusion, then, we may repeat that the prevailing 
motive which dominated Mr. Chase throughout the strug- 
gle was the desire to secure a uniform currency which 
should be more controllable than would be government 
notes emitted for the same purpose. His method of ob- 
taining this currency brought with it the benefit to the 
market for bonds, the securing of depositories and fiscal 
agents, and, above all, the guaranty that in the future there 
should be no banks capable of furnishing credit to revolt- 
ing States. 



Appendix A. 
THE HOOPER BILL. 

A BILL To provide a national currency, secured by a pledge of United 
States stocks, and to provide for the circulation and redemption thereof. 

Be it enacted by the Senate and House of Representatives 
of the United States of America in Congress assembled, 
That there shall be established in the Treasury Depart- 
ment a separate bureau, which shall be charged with 
the execution of this and all other laws that may be 
passed by Congress respecting the issue and regulation 
of a national currency secured by United States bonds. 
The chief officer of the said bureau shall be denominated 
the Comptroller of the Currency, and shall be under the 
general direction of the Secretary of the Treasury. He 
shall be appointed by the President, on the nomination 
of the Secretary of the Treasury, by and with the advice 
and consent of the Senate, and shall hold his office for 
the term of five years unless sooner removed by the 
President, by and with the advice and consent of the 
Senate; he shall receive an annual salary of five thousand 
dollars; he shall have a competent deputy, appointed 
by the Secretary, whose salary shall be two thousand 
five hundred dollars, and who shall possess the power 
and perform the duties attached by law to the office 
of Comptroller during a vacancy in such office and during 
his absence or inability; he shall employ, from time 
to time, the necessary clerks to discharge such duties 
as he shall direct, which clerks shall be appointed and 

"3 



National Monetary Commission 

classified by the Secretary of the Treasury in the manner 
now provided by law. Within fifteen days from the 
time of notice of his appointment the Comptroller shall 
take and subscribe the oath of office prescribed by the 
Constitution and laws of the United States ; and he shall 
give to the United States a bond in the penalty of one hun- 
dred thousand dollars, with not less than two responsible 
freeholders as sureties, to be approved by the Secretary 
of the Treasury, conditioned for the faithful discharge 
of the duties of his office; and he shall not, either directly 
or indirectly, be interested in any association issuing 
national currency under the provisions of this act. The 
Deputy Comptroller so appointed shall also take the 
oath of office prescribed by the Constitution and laws 
of the United States, and shall give a like bond in the 
penalty of fifty thousand dollars. 

SEC. 2. And be it further enacted, That the Comptroller 
of the Currency, with the approval of the Secretary of 
the Treasury, shall devise a seal with suitable inscrip- 
tions for his office, a description of which, with a certi- 
ficate of approval by the Secretary of the Treasury, shall 
be filed in the office of the Secretary of State with an 
impression thereof, which shall thereupon become the 
seal of office of the Comptroller of the Currency, and 
the same may be renewed when necessary. Every 
certificate, assignment, and conveyance executed by 
the Comptroller, in pursuance of any authority conferred 
on him by law, and sealed with his seal of office, shall 
be received in evidence in all places and courts what- 
soever; and all copies of papers in the office of the Comp- 



114 



National Banking System 

troller, certified by him and authenticated by the said 
seal, shall in all cases be evidence equally and in like 
manner as the original. An impression of such seal 
directly on the paper shall be as valid as if made on wax 
or wafer. 

Sec. 3. And be it further enacted, That there shall be 
assigned to the Comptroller of the Currency by the Sec- 
retary of the Treasury suitable rooms in the Treasury 
building for conducting the business of the Currency 
Bureau, in which shall be safe and secure fire-proof vaults, 
in which it shall be the duty of the Comptroller to deposit 
and safely keep all the plates and other valuable things 
belonging to his department; and the Comptroller shall 
from time to time furnish the necessary furniture, sta- 
tionery, fuel, lights, and other proper conveniences for 
the transaction of the said business, the expense of which 
shall be paid out of any money in the treasury not other- 
wise appropriated. 

Sec. 4. And be it further enacted, That the term " United 
States bonds," as used in this act, shall be construed to 
mean all coupon and registered bonds now issued, or that 
may hereafter be issued, on the faith of the United States 
by the Secretary of the Treasury in pursuance of law. 

Sec. 5. And be it further enacted. That associations for 
carrying on the business of banking may be formed by any 
number of persons, not less in any case than five. 

Sec. 6. And be it further enacted, That persons uniting 
to form such an association shall, under their hands and 
seals, make a certificate which shall specify — 

First. The name assumed by such association. 



115 



National Monetary Commission 

Second. The place where its operations of discount and 
deposit are to be carried on; designating the State, Terri- 
tory, or district, and also the particular city, town, or 
village. 

Third. The amount of its capital stock, and the num- 
ber of shares into which the same shall be divided; which 
capital stock shall not be less than fifty thousand dollars. 

Fourth. The names and places of residence of the share- 
holders, and the number of shares held by each of them. 

Fifth. The time when such association shall commence, 
and when the same shall terminate. 

Sixth. A declaration that said certificate is made to 
enable such persons to avail themselves of the advantages 
of this act. 

The said certificate shall be acknowledged before a 
judge of some court of record or a notary public, and the 
acknowledgment thereof certified under the seal of such 
court or notary, and shall be transmitted, together with 
a copy of the articles of association which shall have been 
adopted, to the Comptroller of the Currency, who shall 
record and carefully preserve the same in his office. 
Copies of such certificate, duly certified by the Comp- 
troller, and authenticated by his seal of office, shall be 
legal and sufficient evidence in all courts and places 
within the United States, or the jurisdiction of the gov- 
ernment thereof, of the existence of such association, and 
of every other matter or thing which could be proved by 
the production of the original certificate. 

Sec. 7. And be it further enacted, That at least thirty 
per centum of the capital stock of such association shall 

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be paid in at the time of the commencement of its bank- 
ing business, and the remainder of the capital stock of 
such association shall be paid in instalments of at least 
ten per centum each on the whole amount to which the 
association shall be limited, as frequently as one instal- 
ment at the end of each succeeding two months from the 
time of the commencement of its banking operations, 
until the whole of the capital stock shall be paid in. 

SEC. 8. And be it further enacted, That if any share- 
holder, or his assignee, shall fail to pay any instalment 
on the stock when the same is required by the foregoing 
section to be paid, the directors of such association may 
sell the stock held by such delinquent shareholder, at 
public auction, having given three weeks' previous notice 
thereof in a newspaper published and of general circula- 
tion in the city where the association is located, if the 
same be located in a city, and if not so located, then in a 
newspaper printed, or of general circulation, in the 
county where the same is located, to any person who will 
pay the highest price therefor, and not less than the 
amount then due thereon, with the expenses of adver- 
tisement and sale; and the excess, if any, shall be paid to 
the delinquent shareholder. If no bidder can be found 
who will pay for such stock the amount due thereon to 
the association, and the costs of advertisement and sale, 
the amount previously paid shall be forfeited to the asso- 
ciation, and such stock may subsequently be sold as the 
directors may order. 

SEC. 9. And be it further enacted, That whenever a 
certificate shall have been transmitted to the Comp- 



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troller of the Currency, as provided in the seventh section 
of this act, and the association transmitting the same 
shall notify the Comptroller that at least thirty per 
centum of its capital stock has been paid as aforesaid, 
and that such association has complied with all the 
provisions of this act required to be complied with before 
such association shall be authorized to commence the 
business of banking, and that such association is de- 
sirous of commencing such business, the Comptroller 
shall immediately proceed, in such manner as he shall 
by general rules prescribe, to examine the condition of 
such association; to ascertain especially the amount of 
money paid in on account of its capital stock; the name 
and place of residence of each of the directors of such 
association, and the amount of the capital stock of which 
each is the bona fide owner, and generally whether such 
association has complied with all the requirements of 
this act to entitle it to engage in the business of banking; 
and shall cause to be made, and attested by the oaths 
of a majority of the directors and by the president or 
cashier of such association, a statement of all the facts 
necessary to enable the Comptroller to determine whether 
such association is lawfully entitled to commence the 
business of banking under this act. 

SEC. io. And be it further enacted, That if, upon a 
careful examination of the facts so reported, and of any 
any other facts which may come to the knowledge of 
the Comptroller, whether by means of a special com- 
mission appointed by him for the purpose of inquiring 
into the condition of such association, or otherwise, 



iiS 



National Banking System 

it shall appear that such association is lawfully entitled 
to commence the business of banking, the Comptroller 
shall give to such association a certificate under his 
hand and official seal, showing that such association has 
complied with all the provisions of this act required to 
be complied with before being entitled to commence the 
business of banking under it, and that such association 
is authorized to commence said business accordingly; 
and it shall be the dut3^ of such association to cause 
said certificate to be published in some daily newspaper, 
published in the State where such association is located, 
for at least sixty days next after the issuing thereof. 

Sec. ii. And be it further enacted, That every associa- 
tion formed pursuant to the provisions of this act may 
make and use a common seal, and shall have succession 
by the name designated in its articles of association 
and for the period limited therein; by such name may 
make contracts, sue and be sued, complain and defend 
in any court of law or equity as fully as natural persons, 
and may make by-laws, approved by the Comptroller 
of the Currency, not inconsistent with law or the pro- 
visions of this act, for the election of directors, the man- 
agement of its property, the regulation of its affairs, and 
for the transfer of its stock; and shall have power to 
carry on the business of banking by obtaining and issuing 
circulating notes in accordance with the provisions of 
this act; by discounting bills, notes, and other evidences 
of debt; by receiving deposits; by buying and selling 
gold and silver bullion, foreign coins, and bills of ex- 
change; by loaning money on real and personal security 



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in the manner specified in their articles of association 
for the purposes authorized by this act, and by exercis- 
ing such incidental powers as shall be necessary to .carry 
on such business ; to choose one of their number as presi- 
dent of such association, and to appoint a cashier and 
such other officers and agents as their business may 
require; and to remove such president, cashier, officers, 
and agents at pleasure, and appoint others in their place; 
and their usual business shall be transacted in banking 
offices located at the places specified respectively in its 
certificate of association, and not elsewhere. 

SBC. 12. And be it further enacted, That the shares of 
associations formed under this act shall be deemed per- 
sonal property, and shall be transferable on the books 
of the association in such manner as may be prescribed 
in the articles of association; and every person becom- 
ing a shareholder by such transfer shall, in proportion 
to his shares, succeed to all the rights and liabilities of 
the prior holder of such shares ; and no. change shall be 
made in the articles of association by which the rights, 
remedies, or security of the existing creditors of the asso- 
ciation shall be impaired. 

SEC. 13. And be it further enacted, That it shall be law- 
ful for any association formed under this act, by its 
articles of association, to provide for an increase of its 
capital from time to time as may be deemed expedient; 
but no such increase shall be valid until the increased 
capital shall be paid in and notice thereof shall have 
been transmitted to the Comptroller of the Currency 
and his certificate obtained specifying the amount of 



National Banking System 

such increase of capital stock, and that the same has 
been duly paid to such association. 

Sec. 14. And be it further enacted, That it shall be lawful 
for any such association to purchase, hold, and convey real 
estate as follows : 

First. Such as shall be necessary for its immediate 
accommodation in the transaction of its business. 

Second. Such as shall be mortgaged to it in good faith 
by way of security for loans made by such association, or 
for moneys due thereto. 

Third. Such as shall be conveyed to it in satisfaction 
of debts previously contracted in the course of its dealings. 

Fourth. Such as it shall purchase at sales under judg- 
ments, decrees, or mortgages held by such association. 

Such association shall not purchase or hold real estate 
in any other case for any other purpose than as specified 
in this section. 

SEC. 15. And be it further enacted. That every asso- 
ciation, after having complied with the provisions of this 
act preliminary to the commencement of banking business 
under its provisions, may transfer and deliver to the 
Treasurer of the United States any amount of United 
States bonds bearing an interest, which bonds shall be 
deposited with the Treasurer of the United States, and 
by him safely kept in his office until the same shall be 
otherwise disposed of, in pursuance of the provisions of 
this act. 

Sec. 16. And be it further enacted, That upon the making 
of any such transfer and delivery, the association making 
the same shall be entitled to receive from the Comptroller 



National Monetary C ornmis s io 



n 



of the Currency circulating notes of different denomina- 
tions, in blank, registered and countersigned as hereinafter 
provided, equal in amount to ninety per centum of the 
current market value of the United States bonds so trans- 
ferred and delivered, but not exceeding the par value 
thereof, if bearing interest at the rate of six per centum, 
or of equivalent United States bonds bearing a less rate of 
interest; and at no time shall the total amount of such 
notes, issued to any such association, exceed the amount 
at such time actually paid in of its capital stock. 

SEC. 17. And be it further enacted, That, in order to 
furnish suitable notes for circulation, the Comptroller of 
the Currency is hereby authorized and required, under the 
direction of the Secretary of the Treasury, to cause plates 
to be engraved, in the best manner to guard against coun- 
terfeiting and fraudulent alterations, and to be printed 
therefrom and numbered, such quantity of circulating 
notes, in blank, of the denominations of five dollars, ten 
dollars, twenty dollars, fifty dollars, one hundred dollars, 
five hundred dollars, and one thousand dollars, as may be 
required to supply, under this act, the banks and associa- 
tions entitled to receive the same; which notes shall 
express upon their face that they are secured by United 
States bonds, deposited with the Treasurer of the United 
States and issued under the provisions of this act, which 
statement shall be attested by the written or engraved 
signatures of the Treasurer and Register, and by the 
imprint of the seal of the treasury; and shall also express 
upon their face the promise of the association receiving 
the same, to pay on demand, attested by the signatures 



National Banking System 

of the president and cashier; and the said notes shall bear 
such devices and such other statements, and shall be in 
such form, as the Secretary of the Treasury shall, by regu- 
lation, direct. 

SEC. i 8. And be it further enacted, That the plates and 
special dies to be procured by the Comptroller of the Cur- 
rency for the printing of such circulating notes, shall 
remain under his control and direction, and the expenses 
necessarily incurred, in executing the provisions of this act 
respecting the procuring of such notes, shall be audited 
and paid as contingent expenses of the Treasury Depart- 
ment; and for the purpose of reimbursing the same, and all 
other expenses incurred under this act, and in lieu of all 
taxes upon the circulation authorized by this act, or upon 
the bonds deposited for security of the same, the Treasurer 
of the United States is hereby authorized to reserve and 
retain one per centum on the amount of said bonds so 
deposited, at each semi-annual payment of interest thereon ; 
and all sums so reserved and retained shall be paid into 
the treasury under the direction of the Secretary, and 
every bank, banking association, or corporation not organ- 
ized under the provisions of this act, issuing notes calcu- 
lated or intended to circulate as money, shall, on the first 
day of July next, and regularly on the first days of Jan- 
uary and July thereafter, make and deliver to the Comp- 
troller of the Currency a true and accurate return of the 
gross amount of notes issued by it. whether in circulation, 
or in its vaults, or on deposit elsewhere, specifying the 
amount of the several denominations ; and shall pay to the 
Comptroller of the Currency, semi-annually and at the 



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time of making each return, in lawful money of the United 
States one per centum upon the gross amount of notes 
issued, according to such return; and in default of any 
such return, the bank, banking association, or corporation 
so failing to make return shall pay to the United States a 
penalty of two per centum upon its entire capital stock, 
to be recovered, for the use of the United States, in any 
court of competent jurisdiction. 

Sec. 19. And be it further enacted , That after any such 
association shall have caused its promise to pay such notes 
on demand to be signed by the president or vice-president 
or cashier thereof, in such manner as to make them obli- 
gatory promissory notes, payable on demand, at its place 
of business, such association is hereby authorized to issue 
and circulate the same as money; and the same shall be 
received at par in all parts of the United States in payment 
of taxes, excises, public lands, and all other dues to the 
United States, except for duties on imports, and also for 
all salaries and other debts and demands owing by the 
United States to individuals, corporations, and associa- 
tions within the United States, except interest on public 
debt; and no such association shall issue post notes or 
any other notes to circulate as money than such as are 
authorized by the foregoing provisions of this act. 

SBC. 20. And be it further enacted, That all transfers of 
United States bonds which shall be made by any bank or 
banking association as security for circulating notes under 
the provisions of this act, shall be made to the Treasurer of 
the United States, with a memorandum written or printed 
on the certificate of such bonds, and signed by the cashier 



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or some other officer of the association making the deposit, 
stating that it is held in trust for the association on whose 
behalf such transfer is made, and as security for the re- 
demption and payment of the circulating notes delivered 
to such bank or association; and no tranfser of any such 
bonds by the Treasurer shall be deemed valid or of binding 
force and effect, unless sanctioned by the order or request 
of the Comptroller of the Currency upon the Treasurer. It 
shall be the duty of the Comptroller of the Currency to 
keep in his office a book in which shall be entered the name 
of every bank or banking association, from whose accounts 
such transfer of bonds is made by the Treasurer, and the 
name of the party to whom such transfer is made, unless 
such transfer is made in blank, in which case the fact shall 
be stated in said book, and in either case the par value of 
the bonds so transferred shall be entered therein; and it 
shall be the duty of the Comptroller, immediately upon 
countersigning and entering the same, to advise by mail 
the bank or association, from whose account such transfer 
was made, the kind of bonds and the amount thereof so 
transferred. 

SEC. 21. And be it further enacted, That it shall be the 
duty of the Comptroller of the Currency to countersign 
and enter in the book, in the manner aforesaid, every 
transfer or assignment of any bonds held by the Treasurer 
presented for his signature; and the Comptroller shall 
have at all times during office hours access to the books of 
the Treasurer, for the purpose of ascertaining the correct- 
ness of the transfer or assignment presented to him to 
countersign; and the Treasurer shall have the like access 



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National Monetary Commission 

to the book above mentioned, kept by the Comptroller, 
during office hours, to ascertain the correctness of the 
entries in the same. 

Sec. 22. And be it further enacted, That it shall be the 
duty of either the president or cashier of every banking 
association having stocks deposited in the office of the 
Treasurer of the United States, once or more in each fiscal 
year, and at such time or times during the ordinary busi- 
ness hours as said officer or officers may select, to examine 
and compare the bonds so pledged with the books of said 
department, and, if found correct, to execute to the said 
Treasurer a certificate setting forth the different kinds and 
the amounts thereof, and that the same are in the posses- 
sion and custody of the Treasurer at the date of such 
certificate. Such examination may be made by an agent 
of such bank or association, duly appointed in writing for 
that purpose, whose certificate before mentioned shall be 
of like force and validity as if executed by such president 
or cashier. 

Sec. 23. And be it further enacted, That every associa- 
tion issuing circulating notes under the provisions of this 
act shall make a quarterly report to the Comptroller of the 
Currency, commencing on the first day of the quarter of 
the year next succeeding the organization of such associa- 
tion, and continuing on the first days of each succeeding 
quarter in every year thereafter, which report shall be 
verified by the president and cashier, and all wilful false 
swearing in respect to such report shall be perjury, and 
subject to the punishment prescribed by law for such 
offence. The report hereby required shall be in the form 



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prescribed by the Comptroller, and shall contain a true 
statement of the condition of the association making such 
report, before the transaction of any business on the 
morning of the day specified, next preceding the date of 
such report, in respect of the following items and particu- 
lars, to wit: Loans and discounts, overdrafts due from 
banks, amount due from the directors of the association, 
real estate, specie, cash items, stocks, bonds, and prom- 
issory notes, bills of solvent banks, bills of suspended 
banks, loss and expense account, capital, circulation, 
profits, amount due to banks, amount due to individuals 
and corporations other than banks, amount due the 
Treasurer of the United States, amount due to depositors 
on demand, amount due not included under either of the 
above heads. And it shall be the duty of the Comptroller 
to publish full abstracts of such reports together in two 
newspapers, to be designated by him for that purpose — 
one in the city of Washington and the other in the city of 
New York — exhibiting the items of capital, circulation, 
and deposits, specie and cash items, public securities and 
private securities; and the separate report of each asso- 
ciation shall be published in a newspaper published in the 
place where such association is established, or, if there be 
no newspaper at such place, then in a newspaper published 
at the capital of the State, at the expense of the association 
making such report. In addition to the quarterly reports 
required by this section, every association located and 
doing business in the cities of Boston, New York, Phila- 
delphia, Baltimore, Cincinnati, and New Orleans, and 
issuing circulating notes under the provisions of this act, 

29582 — 10 9 127 



National Monetary C ommis s to 



n 



shall publish, or cause to be published, on the morning of 
the first Tuesday in each month, in a newspaper printed 
in the city in which the association making such report is 
located, to be designated by the Comptroller of the 
Currency, a statement, under the oath of the president or 
cashier, showing the condition of the association making 
such statement, on the morning of the day next preceding 
the date of such statement, in respect to the following 
items and particulars, to wit: average amount of loans 
and discounts, specie, deposits, and circulation. 

Sec. 24. And be it further enacted, That if any such asso- 
ciation shall at any time fail to redeem, in the lawful 
money of the United States, any of its circulating notes, 
when payment thereof shall be lawfully demanded, during 
the usual hours of business, at the office of such associa- 
tion, the holder may cause the same to be protested, in 
one package, by a notary public, unless the president, 
cashier, or teller of the association shall offer to waive de- 
mand and notice of the protest, and shall, in pursuance of 
such offer, make, sign, and deliver to the party making such 
demand an admission in writing, stating the time of the de- 
mand, the amount demanded, and the fact of the non-pay- 
ment thereof; and such notary public, on making such 
protest, or upon receiving such admission, shall forthwith 
forward such admission or notice of protest to the Comp- 
troller of the Currency ; and after such default it shall not 
be lawful for the association suffering the same to pay out 
any of its notes, discount any notes or bills, or otherwise 
prosecute the business of banking, except to receive and 
safely keep money belonging to it, and to deliver special 



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National Banking System 

deposits: Provided, however, That if satisfactory proof be 
produced to such notary public that the payment of any 
such notes is restrained by order of any court of compe- 
tent jurisdiction, such notary public shall not protest the 
same; and when the holder of such notes shall cause 
more than one note or package to be protested on the 
same day, he shall not receive pay for more than one 
protest. 

Sec. 25. And be it further enacted, That on receiving no- 
tice that any such association has failed to redeem any of 
its circulating notes, as specified in the next preceding 
section, the Comptroller of the Currency, with the con- 
currence of the Secretary of the Treasury, shall appoint a 
special agent, (of whose appointment immediate notice 
shall be given to such association,) who shall immediately 
proceed to ascertain whether such association has refused 
to pay its circulating notes, in the lawful money of the 
United States, when demanded as aforesaid, and report to 
the Comptroller the facts so ascertained; and if, from the 
reports so made, the Comptroller shall be satisfied that 
such association has refused to pay its circulating notes as 
aforesaid, and is in default, he shall, within thirty days 
after he shall have received notice of such failure, declare 
the United States bonds and securities pledged by such 
association forfeited to the United States, and the same 
shall thereupon be forfeited accordingly; and thereupon 
the Comptroller shall immediately give notice in such 
manner as the Secretary of the Treasury shall, by general 
rules or otherwise, direct, to the holders of the circulating 
notes of such association to present them for payment at 



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National Monetary Commission 

the treasury of the United States; and the same shall be 
paid as presented, whereupon said Comptroller may, in 
his discretion, cancel an equal amount of bonds pledged 
by such association, equal at current market rates, not ex- 
ceeding par, to the notes paid; and it shall be lawful for 
the Secretary of the Treasury, from time to time, to make 
such regulations respecting the disposition to be made of 
such circulating notes after presentation thereof for pay- 
ment as aforesaid, and respecting the perpetuation of the 
evidence of the payment thereof, as may seem to him 
proper; but all such notes, on being paid, shall be can- 
celled; and for any deficiency in the proceeds of the 
bonds pledged by such association, when disposed of as 
hereinafter specified, to reimburse to the United States 
the amount so expended in paying the circulating notes of 
such association, the United States shall have a first and 
paramount lien upon all the assets of such association, 
and such deficiency shall be made good out of such assets 
in preference to any and all other claims whatsoever, ex- 
cept the necessary costs and expenses of administering the 
same. 

SEC. 26. And be it further enacted, That whenever the 
Comptroller shall become satisfied, as in the last preceding 
section specified, that any such association has refused to 
pay its circulating notes as therein mentioned, he may, in- 
stead of cancelling the United States bonds pledged by 
such association, as provided in the next preceding section, 
cause so much of them as may be necessary to redeem the 
outstanding circulating notes of such association, to be 
sold at public auction in the city of New York, after giving 



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notice of such sale to such association, and also adver- 
tising the time and place of sale, with a pertinent descrip- 
tion of the bonds to be offered for sale, in two or more 
newspapers published in the city of New York, for not less 
than ten days next preceding the day of sale. 

SEC. 27. And be it further enacted, That the Comptroller 
of the Currency may, if he shall be of opinion that the 
interests of the United States will be best promoted 
thereby, sell at private sale any of the stock so transferred 
to him by such association, and receive therefor either 
money or the circulating notes of such failing association : 
Provided, That no such bonds shall be sold by private sale 
for less than the par nor less than the market value thereof 
at the time of sale: And provided, further, That no sales of 
any such stock, either public or private, shall be complete 
until the transfer thereof shall have been made with the 
formalities prescribed in section twenty two of this act. 

SEC. 28. And be it further enacted, That on becoming 
satisfied, as specified in section twenty-six of this act, that 
any such association has refused to pay its circulating 
notes as therein mentioned, and is in default, the Comp- 
troller of the Currency may forthwith appoint a receiver, 
and require of him such bond and security as he shall 
deem proper, who, under the direction of the Comptroller, 
shall take possession of the books, records, and assets of 
every description of such association, collect all debts, 
dues, and claims belonging to such association, and, upon 
the order of a court of record of competent jurisdiction, 
may sell or compound all bad or doubtful debts, and, on a 
like order, sell all the real and personal property of such 



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association, on such terms as the court shall direct, and 
such receiver shall pay over all moneys so made to the 
Treasurer of the United States, and also make report to 
the Comptroller of the Currency of all his acts and pro- 
ceedings. The Comptroller shall thereupon cause notice 
to be given, by advertisement in one or more newspapers 
published in the city in which such association is located, 
if the same be in a city, and if not, then in one or more 
newspapers published in the county where the same is lo- 
cated, for three consecutive months, calling on all persons 
who may have claims against such association to present 
the same, and to make legal proof thereof; and after the 
end of one year from the first publication of such notice, 
the Comptroller, after full provision shall have been first 
made for refunding to the United States any such defi- 
ciency as is mentioned in the twenty-seventh section of 
this act, shall make a ratable dividend of the moneys so 
paid over to him by such receiver on all such claims as 
may have been so proved or adjudicated in a court of 
competent jurisdiction, and from time to time, as the pro- 
ceeds of the assets of such association shall be paid over 
to him, he shall make further dividends, as aforesaid, on 
all claims previously proved or adjudicated; and the 
remainder of such proceeds, if anything, shall be paid 
over to the shareholders of such association, or their legal 
representatives, in proportion to the stock by them 
respectively held: Provided, however, That if any such asso- 
ciation against which proceedings have been so instituted 
on account of any alleged refusal to redeem its circulating 
notes as aforesaid, shall deny having failed to do so, such 



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m 



association may, at any time within ten days after such 
association shall have been notified of the appointment of 
an agent, as provided in the twenty-seventh section of 
this act, apply to the nearest circuit, or district, or terri- 
torial court of the United States, to enjoin further pro- 
ceeding in the premises; and such court, after citing the 
Comptroller of the Currency to show cause why further 
proceedings should not be enjoined, and after the decision 
of the court or finding of a jury that such association has 
not refused to redeem its circulating notes, when legally 
presented, in the lawful money of the United States, shall 
make an order enjoining the Comptroller, and any re- 
ceiver acting under his direction, from all further proceed- 
ings on account of such alleged refusal. 

SEC. 29. And be it further enacted, That the bonds trans- 
ferred to the Treasurer of the United States, as hereinbe- 
fore provided, by any banking association for the security 
of its circulating notes, shall be held exclusively for that 
purpose, until such notes shall be redeemed, except as 
provided in this act; but the Comptroller of the Currency 
may give to any such banking association powers of attor- 
ney to receive and appropriate to its own use the interest 
on the bonds which shall have been so transferred to the 
Treasurer by it; but such powers shall become inopera- 
tive whenever such banking association shall fail to re- 
deem its circulating notes as aforesaid ; and said Comp- 
troller may direct the return of any of said bonds to the 
banking association which transferred the same, upon the 
surrender to him and the cancellation of a proportionate 
amount of such circulating notes: Provided, That ninety 



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per centum of the current market value of the remaining 
bonds which shall have been transferred by the banking 
association offering to surrender such circulating notes 
shall be equal to the amount of all the circulating notes 
retained by such banking association: And provided, fur- 
ther, That there shall have been no failure by such asso- 
ciation to redeem its circulating notes, and that there 
shall have been no other violation by such association 
of any of the provisions of this act for the security of 
the creditors of such association; nor shall the Treasurer 
be required to surrender such bonds in fractional sums of 
less than one thousand dollars; and if, at any time after 
said bonds shall be deposited with the Treasurer of the 
United States, as aforesaid, the market or cash value 
shall be reduced, the Comptroller of the Treasury is hereby 
authorized to demand and receive the amount of such 
depreciation in other United States bonds at cash value, 
or in money, from the association receiving said bills, 
to be deposited with the Treasurer of the United States, 
as long as such depreciation continues. 

Sec. 30. And be it further enacted, That whenever the 
price of any of the bonds pledged as aforesaid for the 
redemption of the circulating notes of any such banking 
association shall be at the stock exchange in the city 
of New York for four consecutive weeks, at a rate less 
than that at which they shall have been estimated when 
so pledged, and such depreciation shall not have been 
made good by a deposit of other bonds of money, it 
shall be the duty of the Comptroller of the Currency 
to notify the Treasurer of the United States of such fact, 



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and the payment of interest upon such depreciated bonds 
shall be suspended, and such interest shall be retained 
by said Treasurer until the same, when added to the 
current market value of the bonds so pledged, to be 
ascertained as before provided, shall be equal to the 
amount for which such bonds were pledged: Provided, 
That it shall be the duty of the Comptroller of the Cur- 
rency, at the expiration of every period of three months, 
to cause the whole of the sums so retained, and then 
remaining in the treasury of the United States, to be 
invested in United States bonds, in the name of the 
Comptroller of the Currency, in trust for the respective 
associations by which the bonds on which such interest 
shall have accrued shall have been pledged; and whenever 
the price of such depreciated bonds at the stock exchange 
in New York shall rise to the price at which they were 
pledged, and so remain for four consecutive weeks, 
such investment shall be assigned to such association, 
and all accruing interest on such pledged bonds shall 
thereafter be paid to such association on demand thereof. 
Sec. 31. And be it further enacted, That whenever any 
such banking association, being desirous of relinquishing 
its banking business, shall have paid at least ninety per 
centum of its circulating notes, and shall have delivered 
the same to the Comptroller of the Currency to be can- 
celled, and shall have provided means and given security, 
to the satisfaction of the Comptroller, for the redemption 
of its outstanding notes of circulation at the place where 
such association is located, and shall have given notice 
thereof by advertisement for six consecutive months 



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in two newspapers of general circulation, published, one 
at the capital of the State in which such association shall 
be located, and one in the city, town, village, or county 
in which the same is located, if there be one published 
therein, it shall be lawful for the Comptroller to authorize 
and for the Treasurer of the United States to retransfer 
and deliver to such banking association all the bonds 
pledged by it; and thereupon all the corporate powers 
of such association, except such as shall be necessary 
to close up its affairs, shall cease. 

SEC. 32. And be it further enacted, That it shall be the 
duty of the Comptroller of the Currency to receive worn- 
out or mutilated circulating notes issued by any such 
banking association, and to deliver in place thereof to 
such association other blank circulating notes to an 
equal amount; and such worn-out or mutilated notes, 
after a memorandum shall have been entered in the 
proper books, in accordance with such regulations as 
may be established by the Comptroller, as well as all 
circulating notes which shall have been paid or surrendered 
to be cancelled, shall be burned to ashes in presence of 
three persons, one to be appointed by the Secretary of 
the Treasury, one by the Comptroller of the Currency, 
and one by the Treasurer of the United States, under 
such regulations as the Secretary of the Treasury may 
prescribe; and in case such notes shall have been deliv- 
ered to the Comptroller by an officer or agent of such 
association, then in the presence, also, of such officer or 
agent ; and a certificate of such burning, signed by the 
parties so appointed, shall be made in the books of 



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the Comptroller, and a duplicate thereof given to such 
officer or agent. 

Sec. 33. And be it further enacted, That it shall be 
unlawful for any officer acting under the provisions of 
this act to countersign or deliver to any such association, 
or to any other company or person, any circulating 
notes contemplated by this act, except as hereinbefore 
provided, and in accordance with the true intent and 
meaning of this act; and any officer who shall violate 
the provisions of this section shall be deemed guilty of 
a high misdemeanor, and on conviction thereof shall 
be punished by fine not exceeding double the amount 
so countersigned and delivered, and imprisonment not 
exceeding fifteen years, at the discretion of the court 
in which he shall be tried. 

Sec. 34. And be it further enacted, That all fees for 
protesting the notes issued by any such banking associa- 
tion shall be paid by the person procuring the protest 
to be made, and such banking association shall be liable 
therefor; but no part of the stock pledged by such bank- 
ing association, as aforesaid, shall be applied to the 
payment of such fees; and all expenses of any prelimi- 
nary or other examinations into the condition of any asso- 
ciation shall be paid by such association ; and all expenses 
of any receivership shall be paid out of the assets of such 
association before distribution of the proceeds thereof. 

Sec. 35. And be it further enacted, That the stock- 
holders, collectively, of any such association shall at no 
time be liable to such association, either as principal 
debtors or sureties, or both, to an amount greater than 



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three-fifths of the capital stock actually paid in and 
remaining undiminished by losses or otherwise ; nor shall 
the directors be so liable, except to such amount and in 
such manner as shall be prescribed by the by-laws of 
such association, adopted by its stock-holders to regulate 
such liabilities. 

Sec. 36. And be it further enacted, That the capital 
stock of any association formed under this act shall be 
divided into shares of one hundred dollars each, and 
shall be assignable on the books of the association in 
such manner as its by-laws shall prescribe; but no share- 
holder in any association under this act shall have power 
to sell or transfer any share held in his own right so long 
as he shall be liable, either as principal, debtor, surety, 
or otherwise, to the association for any debt which 
shall have become due and remain unpaid, nor in any 
case shall such shareholder be entitled to receive any 
dividend, interest, or profit on such shares so long as 
such liabilities shall continue, but all such dividends, 
interests, and profits shall be retained by the association, 
and applied to the discharge of such liabilities; and no 
stock shall be transferred without the consent of a ma- 
jority of the directors while the holder thereof is thus 
indebted to the association. 

Sec. 37. And be it further enacted, That no banking 
association shall take, as security for any loan or dis- 
count, a lien upon any part of its capital stock; but the 
same security, both in kind and amount, shall be required 
of shareholders as of other persons; and no such bank- 
ing association shall be the purchaser or holder of any 



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portion of its capital stock, or of the capital stock of any- 
other incorporated company, unless such purchase shall 
be necessary to prevent loss upon a debt previously con- 
tracted in good faith, on security which, at the time, 
was deemed adequate to insure the payment of such 
debt, independent of any lien upon such stock; or in 
case of forfeiture of stock for the non-payment of instal- 
ments due thereon, and stock so purchased and acquired, 
shall in no case be held by such association so purchasing 
for a longer period of time than six months, if the same 
can, within that time, be sold for what the stock cost. 

SEC. 38. And be it further enacted, That in all elections 
of directors, and in deciding all questions at meetings 
of shareholders, each shareholder shall be entitled to 
one vote on each share of stock held by him ; shareholders 
may vote by proxies duly authorized in writing; but no 
officer, clerk, teller, or bookkeeper of such association 
shall act as proxy; and no stockholder whose liability 
is past due and unpaid shall be allowed to vote. 

Sec. 39. And be it further enacted, That the affairs of 
every such association shall be managed by not less 
than five nor more than nine directors, one of whom 
shall be president of the association. Every director 
shall, during his whole term of service, be a citizen of 
the United States and a resident of the State in which 
such association is located. At least three-fourths of 
the directors shall have resided in the State in which 
such association is located one year next preceding their 
election as directors; and each director shall own, in 
his own right, at least one per centum of the capital 



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stock of such association up to two hundred thousand 
dollars, and the half of one per centum of its capital 
over two hundred thousand dollars. Each director 
shall take an oath that he will, so far as the duty devolves 
on him, diligently and honestly administer the affairs 
of such association, and will not knowingly violate, or 
willingly permit to be violated, any of the provisions of 
this act, and that he is the bona ride owner, in his own 
right, of the shares of stock standing in his name on 
the books of the association, and that the same is not 
hypothecated, or in any way pledged, as security for 
any loan obtained or debt owing to the association of 
which he is a director, which oath, subscribed by him- 
self, and certified by the officer before whom it is taken, 
shall be immediately transmitted to the Comptroller of 
the Currency, and by him filed and preserved in his 
office. 

Sec. 40. And be it further enacted, That the directors 
of any such association first elected shall hold their places 
until their successors shall be elected and qualified. All 
subsequent elections shall be held annually, on such day 
in the month of January as the stockholders of said asso- 
ciation may prescribe; and the directors so elected shall 
hold their places for one year, and until their successors 
are elected and qualified. But any director removing 
from the State, or ceasing to be the owner of the requisite 
amount of stock, shall thereby vacate his place. Any 
vacancy in the board shall be filled by appointment by the 
remaining directors. The director so appointed shall hold 
his place until the next annual election; and if, from any 



40 



National Banking System 

cause, an election of directors shall not be made at the 
time appointed, the association shall not for that cause 
be dissolved, but an election may be held on any subse- 
quent day, thirty days' notice thereof having been given 
in a newspaper printed, or of general circulation, in the 
city, town, or county in which the association is located. 
SEC. 41. And be it further enacted, That every such asso- 
ciation shall at all times have on hand, in lawful money 
of the United States, an amount equal to at least twenty- 
five per centum of the aggregate amount of its outstanding 
notes of circulation and deposits ; and whenever the amount 
of its outstanding notes of circulation and deposits shall 
exceed the above-named proportion for the space of 
twelve days, or whenever such lawful money of the United 
States shall at any time fall below the amount of twenty- 
five per centum of its circulation and deposits, such asso- 
ciation shall not increase its liabilities by making any new 
loans or discounts otherwise than by discounting or pur- 
chasing bills of exchange, payable at sight, nor make any 
dividend of its profits, until the required proportion 
between the aggregate amount of its outstanding notes of 
circulation and deposits and lawful money of the United 
States shall be restored: Provided, however, That clear- 
ing house certificates, representing specie or lawful money 
specially deposited for the purpose of any clearing-house 
association, shall be deemed to be lawful money in the pos- 
session of any association belonging to such clearing house 
holding and owning such certificates, and considered to be a 
part of the lawful money which such association is required 
to have, under the foregoing provisions of this section: 



41 



National Monetary Commission 

Provided, further, That any balance due to any associa- 
tion organized under this act in other places from any 
banking association in the cities of Boston, New York, 
Philadelphia, Baltimore, Cincinnati, or New Orleans, in 
good credit, subject to be drawn for at sight and available 
to redeem their circulating notes and deposits, may be 
deemed to be a part of the lawful money which such asso- 
ciation in other places than the cities of Boston, New York, 
Philadelphia, Baltimore, Cincinnati, and New Orleans, 
are required to have by the foregoing provisions of this 
section to the extent of three-fifths of the said amount of 
twenty-five per centum required. And it shall be com- 
petent for the Comptroller of the Currency to notify any 
such association whose lawful money reserve, as aforesaid, 
shall fall below said proportion of twenty-five per centum, 
to make good such reserve, and if such association shall 
fail for thirty days thereafter so to make good its reserve of 
lawful money of the United States, the Comptroller may, 
with the concurrence of the Secretary of the Treasury, 
appoint a receiver to wind up the business of such asso- 
ciation, as provided in the thirtieth section of this act. 

SEC. 42. And be it further enacted, That no association 
shall at any time be indebted, or in any way liable, to an 
amount exceeding the amount of its capital stock at such 
time actually paid in, and remaining undiminished by 
losses or otherwise, except on the following accounts, that 
is to say: 

First. On account of its notes of circulation. 

Second. On account of moneys deposited with, or col- 
lected by, such association. 



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Third. On account of bills of exchange or drafts drawn 
against money actually on deposit to the credit of such 
association, or due thereto. 

Fourth. On account of liabilities to its stockholders, for 
money paid in on capital stock, and dividends thereon. 

SEC. 43. And be it further enacted, That no association 
shall, either directly or indirectly, pledge or hypothecate 
any of its notes of circulation, for the purpose of procuring 
money, to be paid in on its capital stock, or to be used in 
its banking operations, or otherwise. 

Sec. 44. And be it further enacted, That no association 
or any member thereof shall, during the time it shall con- 
tinue its banking operations, withdraw or permit to be 
withdrawn, either in form of dividends, loans to stock- 
holders for a longer time than six months, or in any other 
manner, any portion of its capital; and if losses shall at 
any time have been sustained by any such association 
equal to or exceeding its undivided profits then on hand, 
no dividend shall be made ; and no dividend shall ever be 
made by any association, while it shall continue its bank- 
ing operations, to an amount greater than its net profits 
then on hand, deducting therefrom its losses and bad 
debts ; and all debts due to any association, on which in- 
terest is past due and unpaid for a period of six months, 
unless the same shall be well secured, and shall be in proc- 
ess of collection, shall be considered bad debts within 
the meaning of this act. 

SEC. 45. And be it further enacted , That the directors of 
every association shall, semi-annually, in the months of 
May and November, declare a dividend of so much of the 

29582—10 10 143 



National Monetary Commission 

profits of such association as they shall judge expedient; 
and, on each dividend day, the cashier shall make, and 
verify by his oath, a full, clear, and accurate statement of 
the condition of the association, as it shall be on that day 
after declaring the dividend; which statement shall 
contain — 

First. The amount of the capital stock actually paid 
in and then remaining, as the capital stock of such bank 
or association. 

Secondly. The amount of the circulating notes of such 
bank or association then in circulation. 

Thirdly. The greatest amount in circulation at any 
time since the making of the last previous statement, as 
shall have been exhibited by the weekly statements of the 
cashier, specifiying the times when the same occurred. 

Fourthly. The amount of balances and debts of every 
kind due to other banks and banking associations. 

Fifthly. The amount due to depositors. 

Sixthly. The total amount of debts and liabilities of 
every description, and the greatest amount since the 
making of the last previous statement, specifiying the 
time when the same accrued. 

Seventhly. The total amount of dividend declared on 
the day of making the statement. 

Eighthly. The amount of lawful money of the United 
States belonging to the association, and in its possession 
at the time of making the statement. 

Ninthly. The amount subject to be drawn at sight, in 
lawful money of the United States, then remaining on 
deposit with any banks or bankers ; specifying the amounts 



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so on deposit in the cities of Boston, New York, Phila- 
delphia, Baltimore, Cincinnati, and New Orleans. 

Tenthly. The amount then on hand of bills or notes, 
issued by other associations, formed and doing business 
under this act, and the amounts issued by other banks and 
banking associations. 

Eleventhly. The amount of balances due from other 
associations doing business under this act, and the amount 
due from other banks, bankers, and banking associations, 
excluding deposits subject to be drawn at sight as aforesaid. 

Twelfthly. The amount on hand of bills, bonds, stocks, 
notes, and other evidences of debts, discounted or purchased 
by the association, specifying particularly the amount of 
suspended debt, the amount considered bad, the amount 
considered doubtful, and the amount in suit or judgment. 

Thirteenthly. The value of the real and personal prop- 
erty held for the convenience of the association, specifying 
the amount of each. 

Fourteenthly. The amount of real estate taken in pay- 
ment of debts due to the association. 

Fifteenthly. The amount of the undivided profits of 
the association. 

Sixteenthly. The total amount of the liability to the 
association by the directors thereof, collectively, specifying 
the gross amount of such liabilities as principal debtors, 
and the gross amount as indorsers or sureties. 

The statement thus made shall forthwith be transmitted 
to the Comptroller of the Currency. 

SEC. 46. And be it further enacted, That every association 
may take, reserve, receive, and charge on any loan or dis- 



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National M on et ary Commission 

count made, or upon any note, bill of exchange, or other 
evidence of debt, such rate of interest or discount as is for 
the time the established rate of interest for delay in the 
payment of money, in the absence of contract between 
the parties, by the laws of the several States in which the 
associations are respectively located, and no more: Pro- 
vided, however, That interest may be reserved or taken in 
advance, at the time of making the loan or discount, 
according to the usual rules of banking; and the know- 
ingly taking, reserving, or charging of a rate of interest 
greater than that allowed by this section shall be held and 
adjudged a forfeiture of the debt or demand on which the 
same is taken, reserved, or charged; but the purchase, 
discount, or sale of a bill of exchange, drawn on actually 
existing values, and payable at another place than the 
place of such purchase, discount, or sale, at the current 
discount or premium, shall not be considered as taking, 
reserving, or charging interest. 

Sec. 47. And be it farther enacted, That the total liabili- 
ties of any person, or of any company or firm, (including 
in the liabilities of a company or firm the liabilities of the 
several members thereof,) to any association, including 
liabilities as acceptor of bona fide bills of exchange, pay- 
able out of the State where the association is located, shall 
at no time exceed one-third; exclusive of liabilities as 
acceptor, one-fifth; and exclusive of liabilities on such bills 
of exchange, one-tenth part of the amount of the capital 
stock of such association actually paid in. 

SEC. 48. And be it farther enacted, That no association 
shall, at any time, pay out on loans or discounts, or in pur- 



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chasing drafts or bills of exchange, or in payment of 
deposits, nor shall it in any other mode put in circulation 
the notes of any bank or banking association, which 
notes shall not, at any such time, be receivable, at par, on 
deposit, and in payment of debts by the association so pay- 
ing out or circulating such notes; nor shall it knowingly 
pay out or put in circulation any notes issued by any 
bank or banking association which at the time of such 
paying out or putting in circulation is not redeeming its 
circulating notes in lawful money of the United States. 

SEC. 49. And be it further enacted, That all transfer of 
the notes, bonds, bills of exchange, and other evidences of 
debt owing to any association, or of deposits to its credit; 
all assignments of mortgages, sureties on real estate, or of 
judgments or decrees in its favor; all deposits of money, 
bullion, or other valuable thing for its use, or for the use 
of any of its shareholders or creditors; all payments of 
money to either, made after the commission of an act of 
insolvency, or in contemplation thereof, with a view to 
prevent the application of its assets in the manner pre- 
scribed by this act, or with a view to the preference of one 
creditor to another, except in payment of its circulating 
notes, shall be utterly null and void. 

SBC. 50. And be it further enacted, That if the directors 
of any association shall knowingly violate, or knowingly 
permit any of the officers, agents, or servants of the asso- 
ciation to violate, any of the provisions of this act, all the 
rights, privileges, and franchises of the association, 
derived from this act, shall be thereby forfeited. Such 
violation shall, however, be determined and adjudged by 



147 



National Monetary C ommis s to 



11 



a proper circuit, district, or territorial court of the United 
States, before the association shall be declared dissolved. 
And in cases of such violation, every director who par- 
ticipated in or assented to the same shall be held liable in 
his personal and individual capacity for all damages which 
the association, its shareholders, or any other person, 
shall have sustained in consequence of such violation. 

Sec. 51. And be it further enacted, That the Comptroller 
of the Currency, with the approbation of the Secretary of 
the Treasury, as often as shall be deemed necessary or 
proper, shall appoint a suitable person or persons to make 
an examination of the affairs of every banking association, 
which person shall not be a director or other officer in any 
association whose affairs he shall be appointed to examine, 
and who shall have power to make a thorough examina- 
tion into all the affairs of the association, and, in doing so, 
to examine any of the officers or agents thereof on oath, 
and shall make a full and detailed report of the condition 
of the association to the Comptroller; and the association 
shall not be subject to any other visitorial powers than 
such as are authorized by this act, except such as are 
vested in the several courts of law and chancery. And 
every person appointed to make such examination shall 
receive for his services at the rate of five dollars for each 
day by him employed in such examination, and two dol- 
lars for every twenty-five miles he shall necessarily travel 
in the performance of his duty, which shall be paid by the 
association by him examined. 

SEC. 52. And be it further enacted, That every president, 
director, cashier, teller, clerk, or agent of any association, 



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who shall embezzle, abstract, or wilfully misapply any of 
the moneys, funds, or credits of the association, or shall, 
without authority from the directors, issue or put in cir- 
culation any of the notes of the association, or shall, 
without such authority, issue or put forth any certificate 
of deposit, draw any order or bill of exchange, make any 
acceptance, assign any note, bond, draft, bill of exchange, 
mortgage, judgment, or decree, or shall make any false 
entry in any book, report, or statement of the association, 
with intent, in either case, to injure or defraud any other 
company, body politic or corporate, or any individual 
person, or to deceive any officer or agent appointed to 
examine the affairs of any such association, shall be 
deemed guilty of a misdemeanor, and upon conviction 
thereof shall be punished by imprisonment not less than 
five nor more than ten years. 

SEC. 53. And be it further enacted, That the president 
and cashier of every such association shall cause to be 
kept at all times a full and correct list of the names 
and residences of all the shareholders in the association, 
in the office where its business is transacted; and such 
list shall be subject to the inspection of all the share- 
holders and creditors of the association during business 
hours of each day in which business may be legally 
transacted; and a copy of such list, verified by the oath 
of such president or cashier, shall, at the beginning of 
every quarter of a year, be transmitted to the Comptroller 
of the Currency, commencing on the first day of the 
first quarter after the passage of this act. 



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National Monetary Commission 

Sec. 54. And be it further enacted, That the Secretary 
of the Treasury is hereby authorized, whenever, in his 
judgment, the public interest will be promoted thereby, 
to employ any of such associations, doing business under 
this act, as depositaries of the public moneys, except 
receipts from customs. 

Sec. 55. And be it further enacted, That all suits and 
proceedings arising out of the provisions of this act, 
in which the United States or its officers or agents shall 
be parties, shall be conducted by the district attorneys 
of the several districts, under the direction and super- 
vision of the Solicitor of the Treasury. 

SEC. 56. And be it further enacted, That every person 
who shall mutilate, cut, deface, disfigure, or perforate 
with holes, or shall unite or cement together, or do any 
other thing to any bank bill, draft, note, or other evi- 
dence of debt issued by any such association, or shall 
cause or procure the same to be done, with intent to 
render such bank bill, draft, note, or other evidence 
of debt unfit to be reissued by said association, shall upon 
conviction forfeit fifty dollars to the association who 
shall be injured thereby, to be recovered by action in 
any court having jurisdiction. 

Sec. 57. And be it further enacted, That if any person 
shall falsely make, forge, or counterfeit, or cause or 
procure to be made, forged, or counterfeited, or will- 
ingly aid or assist in falsely making, forging, or counter- 
feiting, any note in imitation of, or purporting to be in 
imitation of, the circulating notes issued under the pro- 
visions of this act, or shall pass, utter, or publish, or 



150 



National Banking System 

attempt to pass, utter, or publish, any false, forged, 
or counterfeited note, purporting to be issued by any 
association doing a banking business under the provisions 
of this act, knowing the same to be falsely made, forged, 
or counterfeited, or shall falsely alter, or cause or procure 
to be falsely altered, or willingly aid or assist in falsely 
altering, any such circulating notes, issued as aforesaid, 
or shall pass, utter, or publish, or attempt to pass, utter, 
or publish as true, any falsely altered or spurious cir- 
culating note issued, or purporting to have been issued, 
as aforesaid, knowing the same to be falsely altered or 
spurious, every such person shall be deemed and adjudged 
guilty of felony, and being thereof convicted by due 
course of law, shall be sentenced to be imprisoned and 
kept at hard labor for a period not less than five years 
nor more than fifteen years, and to be fined in a sum not 
exceeding one thousand dollars. 

Sec. 58. And be it further enacted, That if any person 
shall make or engrave, or cause or procure to be made 
or engraved, or shall have in his custody and possession 
any engraved plate or block after the similitude of any 
plate from which any circulating notes issued as afore- 
said shall have been printed, with intent to use such 
plate or block, or cause or suffer the same to be used, 
in forging or counterfeiting any of the notes issued as 
aforesaid, or shall have in his custody or possession 
any blank note or notes engraved and printed after 
the similitude of any notes issued as aforesaid, with 
intent to use such blanks, or cause or suffer the same 
to be used, in forging or counterfeiting any of the notes 



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National Monetary Commission 

issued as aforesaid, or shall have in his custody or posses- 
sion any paper adapted to the making of such notes, and 
similar to the paper upon which any such notes shall have 
been issued, with intent to use such paper, or cause or 
suffer the same to be used, in forging or counterfeiting 
any of the notes issued as aforesaid, every such person, 
being thereof convicted by due course of law, shall be 
sentenced to be imprisoned and kept to hard labor for 
a term not less than five nor more than fifteen years, 
and fined in a sum not exceeding one thousand dollars. 

Sec. 59. And be it further enacted, That suits, actions, 
and proceedings by and against any association under 
this act, may be had in any circuit, district, or territorial 
court of the United States held within the district in which 
such association may be established. 

SEC. 60. And be it further enacted, That it shall be the 
duty of the Comptroller of the Currency to report annually 
to Congress, at the commencement of its session — 

First. A summary of the state and condition of every 
association from whom reports have been received the 
preceding year, at the several dates to which such reports 
refer, with an abstract of the whole amount of banking 
capital returned by them, of the whole amount of their 
debts and liabilities, the amount of circulating notes out- 
standing, and the total amount of means and resources, 
specifying the amount of specie held by them at the times 
of their several returns, and such other information in re- 
lation to said associations as, in his judgment, may be 
useful. 



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National Banking System 

Second. A statement of the associations whose business 
has been closed during the year, with the amount of their 
circulation redeemed, and the amount outstanding. 

Third. To suggest any amendment to the laws relative 
to banking by which the system may be improved, and 
the security of the billholders and depositors may be in- 
creased. 

Fourth. To report the names and compensation of the 
clerks employed by him, and the whole amount of the 
expenses of the banking department during the year; and 
such report shall be made by or before the first day of 
December in each year, and the usual number of copies 
for the use of the Senate and House, and one thousand 
copies for the use of the department, shall be printed by 
the public printer and in readiness for distribution on the 
first meeting of Congress. 

Sec. 6i. And be it further enacted, That the sums neces- 
sary to defray the expenses to be incurred in the execu- 
tion of this act be, and the same are hereby, appropriated 
out of any moneys in the treasury not otherwise appro- 
priated. 



153 



Appendix B. 
THE SHERMAN ACT. 

AN ACT To provide a National Currency, secured by a pledge of United 
States stocks, and to provide for the circulation and redemption thereof. 

Be it enacted by the Senate and House of Representatives 
of the United States of America in Congress assembled, That 
there shall be established in the Treasury Department a 
separate bureau, which shall be charged with the execution 
of this and all other laws that may be passed by Congress 
respecting the issue and regulation of a national currency 
secured by United States bonds. The chief officer of the 
said bureau shall be denominated the comptroller of the 
currency, and shall be under the general direction of the 
Secretary of the Treasury. He shall be appointed by the 
President, on the nomination of the Secretary of the Treas- 
ury, by and with the advice and consent of the Senate, 
and shall hold his office for the term of five years unless 
sooner removed by the President, by and with the advice 
and consent of the Senate; he shall receive an annual 
salary of five thousand dollars ; he shall have a competent 
deputy, appointed by the Secretary, whose salary shall 
be two thousand five hundred dollars, and who shall 
possess the power and perform the duties attached by law 
to the office of comptroller during a vacancy in such office, 
and during his absence and inability; he shall employ, 
from time to time, the necessary clerks to discharge such 
duties as he shall direct, which clerks shall be appointed 
and classified by the Secretary of the Treasury in the man- 

155 



National Monetary Commission 

ner now provided by law. Within fifteen days from the 
time of notice of his appointment, the comptroller shall 
take and subscribe the oath of office prescribed by the 
Constitution and laws of the United States; and he shall 
give to the United States a bond in penalty of one hundred 
thousand dollars, with not less than two responsible free- 
holders as sureties, to be approved by the Secretary of the 
Treasury, conditioned for the faithful discharge of the 
duties of his office. The deputy comptroller so appointed 
shall also take the oath of office prescribed by the Con- 
stitution and laws of the United States, and shall give a 
like bond in the penalty of fifty thousand dollars. The 
comptroller and deputy comptroller shall not, either 
directly or indirectly, be interested in any association 
issuing national currency under the provisions of this act. 
SEC. 2. And be it further enacted, That the comptroller 
of the currency, with the approval of the Secretary of the 
Treasury, shall devise a seal with suitable inscriptions, for 
his office, a description of which, with a certificate of appro- 
val by the Secretary of the Treasury, shall be filed in the 
office of the Secretary of State with an impression thereof, 
which shall thereupon become the seal of office of the 
comptroller of the currency, and the same may be renewed 
when necessary. Every certificate, assignment, and con- 
veyance executed by the comptroller, in pursuance of any 
authority conferred on him by law, and sealed with his 
seal of office, shall be received in evidence in all places and 
courts whatsoever; and all copies of papers in the office 
of the comptroller, certified by him and authenticated by 
the said seal, shall in all cases be evidence equally and in 



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like manner as the original. An impression of such seal 
directly on the paper shall be as valid as if made on wax 
or wafer. 

Sec. 3. And be it further enacted, That there shall be 
assigned to the comptroller of the currency by the Secre- 
tary of the Treasury suitable rooms in the treasury build- 
ing for conducting the business of the currency bureau, 
in which shall be safe and secure fire-proof vaults, in which 
it shall be the duty of the comptroller to deposit and safely 
keep all the plates and other valuable things belonging to 
his department; and the comptroller shall from time to 
time furnish the necessary furniture, stationery, fuel, 
lights, and other proper conveniences for the transaction 
of the said business. 

SEC. 4. And be it further enacted, That the term " United 
States bonds," as used in this act, shall be construed to 
mean all coupon and registered bonds now issued or that 
may hereafter be issued on the faith of the United States 
by the Secretary of the Treasury in pursuance of law. 

SEC. 5. And be it further enacted, That associations for 
carrying on the business of banking may be formed by any 
number of persons, not less in any case than five. 

SEC. 6. And be it further enacted, That persons uniting 
to form such an association shall, under their hands and 
seals, make a certificate which shall specify — 

First. The name assumed by such association. 

Second. The place where its operations of discount and 
deposite are to be carried on, designating the State, Terri- 
tory, or district, and also the particular city, town, or 
village. 



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National Monetary Commission 

Third. The amount of its capital stock, and the num- 
ber of shares into which the same shall be divided; which 
capital stock shall not be less than fifty thousand dollars; 
and in cities whose population is over ten thousand per- 
sons, the capital stock shall not be less than one hundred 
thousand dollars. 

Fourth. The names and places of residence of the share- 
holders, and the number of shares held by each of them. 

Fifth. The time when such association shall commence. 

Sixth. A declaration that said certificate is made to 
enable such persons to avail themselves of the advantages 
of this act. 

The said certificate shall be acknowledged before a 
judge of some court of record or a notary public, and the 
acknowledgement thereof certified under the seal of such 
court or notary, and shall be transmitted, together with 
a copy of the articles of association which shall have been 
adopted, to the comptroller of the currency, who shall 
record and carefully preserve the same in his office. 
Copies of such certificate, duly certified by the comptroller, 
and authenticated by his seal of office, shall be legal and 
sufficient evidence in all courts and places within the 
United States, or the jurisdiction of the Government 
thereof, of the existence of such association, and of every 
other matter or thing which could be proved by the pro- 
duction of the original certificate. 

SEC. 7. And be it further enacted, That at least thirty 
per centum of the capital stock of such association shall 
be paid in at the time of the commencement of its banking 
business, and the remainder of the capital stock of such 



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National Banking System 

association shall be paid in instalments of at least ten per 
centum each on the whole amount to which the associa- 
tion shall be limited, as frequently as one instalment at 
the end of each succeeding two months from the time of 
the commencement of its banking operations, until the 
whole of the capital stock shall be paid in. 

SEC. 8. And be it further enacted, That if any share- 
holder, or his assignee, shall fail to pay any instalment 
on the stock when the same is required by the foregoing 
section to be paid, the directors of such association may 
sell the stock held by such delinquent shareholder, at 
public auction, having given three weeks' previous notice 
thereof in a newspaper published and of general circula- 
tion in the city where the association is located, if the 
same be located in a city, and if not so located, then in a 
newspaper printed, or of general circulation, in the county 
where the same is located, to any person who will pay the 
highest price therefor, and not less than the amount then 
due thereon, with the expenses of advertisement and sale; 
and the excess, if any, shall be paid to the delinquent 
shareholder. If no bidder can be found who will pay for 
such stock the amount due thereon to the association, 
and the costs of advertisement and sale, the amount pre- 
viously paid shall be forfeited to the association, and such 
stock may subsequently be sold as the directors may order. 

SEC. 9. And be it further enacted, That whenever a cer- 
tificate shall have been transmitted to the comptroller of 
the currency, as provided in this act, and the association 
transmitting the same shall notify the comptroller that at 
least thirty per centum of its capital stock has been paid 

29582—10 11 159 



National Monet ary Commissio 



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as aforesaid, and that such association has complied with 
all the provisions of this act required to be complied 
with before such association shall be authorized to com- 
mence the business of banking, and that such association 
is desirous of commencing such business, the comptroller 
shall immediately proceed, in such manner as he shall by 
general rules prescribe, to examine the condition of such 
association; to ascertain especially the amount of money 
paid in on account of its capital stock ; the name and place 
of residence of each of the directors of such association, 
and the amount of the capital stock of which each is the 
bona fide owner, and generally whether such association has 
complied with all the requirements of this act to entitle 
it to engage in the business of banking ; and shall cause to 
be made, and attested by the oaths of a majority of the 
directors and by the president or cashier of such associa- 
tion, a statement of all the facts necessary to enable the 
comptroller to determine whether such association is law- 
fully entitled to commence the business of banking under 
this act. 

Skc. io. And be it further enacted, That if, upon a care- 
ful examination of the facts so reported, and of any other 
facts which may come to the knowledge of the comptroller, 
whether by means of a special commission appointed by 
him for the purpose of inquiring into the condition of such 
association, or otherwise, it shall appear that such asso- 
ciation is lawfully entitled to commence the business of 
banking, the comptroller shall give to such association a 
certificate under his hand and official seal, showing that 
such association has complied with all the provisions of 



1 60 



National Banking System 

this act required to be complied with before being entitled 
to commence the business of banking under it, and that 
such association is authorized to commence said business 
accordingly; and it shall be the duty of such association 
to cause said certificate to be published in some newspaper, 
published in the city or county where such association is 
located, for at least sixty days next after the issuing thereof: 
Provided, That if no newspaper is published in such city 
or county, such certificate shall be published as the comp- 
troller of the currency shall direct. 

SEC. ii. And be it further enacted, That every asso- 
ciation formed pursuant to the provisions of this act 
may make and use a common seal, and shall have suc- 
cession by the name designated in its articles of associa- 
tion and for the period limited therein, not, however, 
exceeding twenty years from the passage of this act; 
by such name may make contracts, sue and be sued, 
complain and defend in any court of law or equity as 
fully as natural persons, and may make by-laws, ap- 
proved by the comptroller of the currency, not incon- 
sistent with the laws of the United States or the pro- 
visions of this act, for the election of directors, the man- 
agement of its property, the regulation of its affairs, 
and for the transfer of its stock; and shall have power 
to carry on the business of banking by obtaining and 
issuing circulating notes in accordance with the pro- 
visions of this act; by discounting bills, notes, and other 
evidences of debt; by receiving deposits; by buying 
and selling gold and silver bullion, foreign coins, and 
bills of exchange; by loaning money on real and per- 



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sonal security, in the manner specified in their articles 
of association, for the purposes authorized by this act, 
and by exercising such incidental powers as shall be 
necessary to carry on such business; to choose one of 
their number as president of such association, and to 
appoint a cashier and such other officers and agents as 
their business may require; and to remove such presi- 
dent, cashier, officers, and agents at pleasure, and appoint 
others in their place; and their usual business shall be 
transacted in banking offices located at the places speci- 
fied respectively in its certificate of association, and not 
elsewhere. 

Sec. 12. And be it further enacted, That the shares of 
associations formed under this act shall be deemed per- 
sonal property, and shall be transferable on the books 
of the association in such manner as may be prescribed 
in the by-laws or articles of association; and every 
person becoming a shareholder by such transfer shall, 
in proportion to his shares, succeed to all the rights and 
liabilities of the prior holder of such shares; and no 
change shall be made in the articles of association by 
which the rights, remedies, or security of the existing 
creditors of the association shall be impaired. For all 
debts, contracted by such association for circulation, 
deposit, or otherwise, each shareholder shall be liable 
to the amount, at their par value, of the shares held by 
him in addition to the amount invested in such shares. 

Sec. 13. And be it further enacted, That it shall be law- 
ful for any association formed under this act, by its ar- 
ticles of association, to provide for an increase of its 



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capital from time to time as may be deemed expedient, 
subject to the limitations of this act; but no such in- 
crease shall be valid until the increased capital shall be 
paid in, and notice thereof shall have been transmitted 
to the comptroller of the currency, and his certificate 
obtained, specifying the amount of such increase of capital 
stock, and that the same has been duly paid to such 
association. 

SEC. 14. And be it further enacted, That it shall be law- 
ful for any such association to purchase, hold, and convey 
real estate as follows : 

First. Such as shall be necessary for its immediate 
accommodation in the transaction of its business. 

Second. Such as shall be mortgaged to it in good faith 
by way of security for loans made by such association, 
or for moneys due thereto. 

Third. Such as shall be conveyed to it in satisfaction 
of debts previously contracted in the course of its deal- 
ings. 

Fourth. Such as it shall purchase at sales under judg- 
ments, decrees, or mortgages held by such association. 

Such association shall not purchase or hold real estate 
in any other case or for any other purpose than as speci- 
fied in this section. 

Sec. 15. And be it further enacted, That every associa- 
tion, after having complied with the. provisions of this act 
preliminary to the commencement of banking business 
under its provisions, shall transfer and deliver to the 
treasurer of the United States any United States bonds 
bearing interest to an amount not less than one third 



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National Monetary C ommis s to 



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of the capital stock paid in ; which bonds shall be deposited 
with the treasurer of the United States, and by him 
safely kept in his office until the same shall be otherwise 
disposed of, in pursuance of the provisions of this act. 

SEC. i 6. And be it further enacted, That upon the mak- 
ing of any such transfer and delivery, the association 
making the same shall be entitled to receive from the 
comptroller of the currency circulating notes of different 
denominations, in blank, registered and countersigned 
as hereinafter provided, equal in amount to ninety per 
centum of the current market value of the United States 
bonds so transferred and delivered, but not exceeding 
the par value thereof, if bearing interest at the rate 
of six per centum, or of equivalent United States bonds, 
bearing a less rate of interest; and at no time shall the 
total amount of such notes, issued to any such associa- 
tion, exceed the amount at such time actually paid in 
of its capital stock. 

Sec. 17. And be it further enacted, That the entire 
amount of circulating notes to be issued under this act 
shall not exceed three hundred millions of dollars. One 
hundred and fifty millions of which sum shall be appor- 
tioned to associations in the States, in the District of 
Columbia, and in the Territories, according to repre- 
sentative population, and the remainder shall be appor- 
tioned by the Secretary of the Treasury among associa- 
tions formed in the several States, in the District of 
Columbia, and in the Territories, having due regard 
to the existing banking capital, resources, and business, 
of such States, District, and Territories. 



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National Banking System 

SEC. i 8. And be it further enacted, That, in order to 
furnish suitable notes for circulation, the comptroller 
of the currency is hereby authorized and required, 
under the direction of the Secretary of the Treasury, 
to cause plates to be engraved in the best manner to 
guard against counterfeiting and fraudulent alterations, 
and to have printed therefrom, and numbered, such 
quantity of circulating notes, in blank, of the denomina- 
tions of five dollars, ten dollars, twenty dollars, fifty 
dollars, one hundred dollars, five hundred, dollars, and 
one thousand dollars, as may be required to supply, 
under this act, the associations entitled to receive the 
same; which notes shall express upon their face that 
they are secured by United * States bonds, deposited 
with the treasurer of the United States, and issued under 
the provisions of this act, which statement shall be 
attested by the written or engraved signatures of the 
treasurer and register, and by the imprint of the seal of 
the treasury ; and shall also express upon their face the 
promise of the association receiving the same, to pay 
on demand, attested by the signatures of the president, 
or vice-president, and cashier; and the said notes shall 
bear such devices and such other statements, and shall 
be in such form, as the Secretary of the Treasury shall, 
by regulation, direct. 

Sec. 19. And be it further enacted, That the plates and 
special dies to be procured by the comptroller of the 
currency for the printing of such circulating notes shall 
remain under his control and direction, and the expenses 
necessarily incurred in executing the provisions of this 



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act respecting the procuring of such notes, shall be 
audited and paid as contingent expenses of the Treasury 
Department; and for the purpose of reimbursing the 
same, and all other expenses incurred under this act, 
and in lieu of all taxes upon the circulation authorized 
by this act, or upon the bonds deposited for the security 
of the same, such association organized under this act 
shall semi-annually, on the first days of January and 
July, after its organization, pay to the comptroller of 
the currency, in lawful money of the United States, 
one per centum on the amount of circulating notes received 
by such association, and in default thereof, the treasurer 
of the United States is hereby authorized to reserve and 
retain one per centum on the amount of said bonds 
so deposited, at each semi-annual payment of interest 
thereon; and all sums so reserved and retained shall 
be paid into the treasury under the direction of the 
Secretary, and every bank, banking association, or 
corporation, not organized under the provisions of this 
act, issuing notes calculated or intended to circulate as 
money, shall, on the first day of July next, and regularly 
on the first days of January and July thereafter, make 
and deliver to the comptroller of the currency a true 
and accurate return of the gross amount of notes issued 
by it, whether in circulation, or in its vaults, or on deposit 
elsewhere; and in default of any such return, the bank, 
banking association, or corporation so failing to make 
return, shall pay to the United States a penalty of two 
per centum upon its entire capital stock, to be recovered, 
for the use of the United States, in any court of competent 
jurisdiction. 

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National Banking System 

Sec. 20. And be it further enacted, That after any such 
association shall have caused its promise to pay such notes 
on demand to be signed by the president or vice-president 
and cashier thereof, in such manner as to make them 
obligatory promissory notes, payable on demand, at its 
place of business, such association is hereby authorized to 
issue and circulate the same as money; and the same 
shall be received at par in all parts of the United States in 
payment of taxes, excises, public lands, and all other dues 
to the United States, except for duties on imports, and 
also for all salaries and other debts and demands owing by 
the United States to individuals, corporations, and asso- 
ciations within the United States, except interest on 
public debt; and no such association shall issue post 
notes, or any other notes to circulate as money, than such 
as are authorized by the foregoing provisions of this act. 

SEC. 21. And be it further enacted, That all transfers of 
United States bonds which shall be made by any associa- 
tion as security for circulating notes under the provisions 
of this act, shall be made to the treasurer of the United 
States, with a memorandum written or printed on the 
certificate of such bonds, and signed by the cashier, or 
some other officer of the association making the deposit, 
stating that it is held in trust for the association on whose 
behalf such transfer is made, and as security for the re- 
demption and payment of the circulating notes delivered 
to such association; and no transfer of any such bonds 
by the treasurer shall be deemed valid, or of binding force 
and effect, unless sanctioned by the order or request of 
the comptroller of the currency upon the treasurer It 



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National Monetary Commission 

shall be the duty of the comptroller of the currency to 
keep in his office a book in which shall be entered the 
name of every association from whose accounts such 
transfer of bonds is made by the treasurer, and the name 
of the party to whom such transfer is made, unless such 
transfer is made in blank, in which case the fact shall be 
stated in said book, and in either case the par value of the 
bonds so transferred shall be entered therein; and it shall 
be the duty of the comptroller, immediately upon coun- 
tersigning and entering the same, to advise by mail the 
association from whose account such transfer was made, 
the kind of bonds and the amount thereof so transferred. 

SEC. 22. And be it further enacted, That it shall be the 
duty of the comptroller of the currency to countersign 
and enter in the book, in the manner aforesaid, every 
transfer or assignment of any bonds held by the treas- 
urer presented for his signature; and the comptroller 
shall have at all times during office hours access to the 
books of the treasurer, for the purpose of ascertaining 
the correctness of the transfer or assignment presented to 
him to countersign; and the treasurer shall have the like 
access to the book above mentioned, kept by the comp- 
troller, during office hours to ascertain the correctness 
of the entries in the same. 

SEC. 23. And be it further enacted, That it shall be the 
duty of either the president or cashier of every banking 
association having stocks deposited in the office of the 
treasurer of the United States, once or more in each 
fiscal year, and at such time or times during the ordinary 
business hours as said officer or officers may select, to ex- 



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National Banking System 

amine and compare the bonds so pledged with the books 
of said Department, and, if found correct, to execute to 
the said treasurer a certificate setting forth the different 
kinds and the amounts thereof, and that the same are in 
the possession and custody of the treasurer at the date of 
such certificate. Such examination may be made by an 
agent of such association, duly appointed in writing for 
that purpose, whose certificate before mentioned shall be 
of like force and validity as if executed by such president 
or cashier. 

Sec. 24. And be it further enacted, That every associa- 
tion issuing circulating notes under the provision of this 
act, shall make a quarterly report to the comptroller of the 
currency commencing on the first day of the quarter of 
the year next succeeding the organization of such associa- 
tion, and continuing on the first days of each succeeding 
quarter in every year thereafter, which report shall be 
verified by the oath or affirmation of the president and 
cashier, and all wilful false swearing in respect to such 
report shall be perjury, and subject to the punishment 
prescribed by law for such offence. The report hereby 
required shall be in the form prescribed by the comptroller, 
and shall contain a true statement of the condition of the 
association making such report, before the transaction of 
any business on the morning of the day specified, next pre- 
ceding the date of such report, in respect of the following 
items and particulars, to wit: Loans and discounts, over- 
drafts due from banks, amount due from the directors of 
the association, real estate, specie, cash items, stocks, 
bonds, and promissory notes, bills of solvent banks, bills 



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National Monetary Commission 

of suspended banks, loss and expense account, capital, 
circulation, profits, amount due to banks, amount due to 
individuals and corporations other than banks, amount 
due the treasurer of the United States, amount due to 
depositors on demand, amount due, not included under 
either of the above heads. And it shall be the duty of the 
comptroller to publish full abstracts of such reports 
together in two newspapers to be designated by him for 
that purpose, one in the city of Washington and the other 
in the city of New York, exhibiting the items of capital, 
circulation, and deposits, specie and cash items, public 
securities and private securities; and the separate report 
of each association shall be published in a newspaper pub- 
lished in the place where such association is established, 
or, if there be no newspaper at such place, then in a news- 
paper published at the capital of the State, at the expense 
of the association making such report. In addition to 
the quarterly reports required by this section, every asso- 
ciation located and doing business in the cities of 
Boston, Providence, New York, Philadelphia, Baltimore, 
Cincinnati, Chicago, St. Louis, and New Orleans, shall pub- 
lish, or cause to be published, on the morning of the first 
Tuesday in each month, in a newspaper printed in the city 
in which the association making such report is located, to 
be designated by the comptroller of the currency, a state- 
ment, under the oath of the president or cashier, showing 
the condition of the association making such statement, 
on the morning of the day next preceding the date of such 
statement, in respect to the following items and particu- 
lars, to wit: average amount of loans and discounts, 
specie, deposits, and circulation. 

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National Banking System 

SEC. 25. And be it further enacted, That if any such 
association shall, at any time fail to redeem, in the lawful 
money of the United States, any of its circulating notes, 
when payment thereof shall be lawfully demanded, 
during the usual hours of business, at the office of such 
association, the holder may cause the same to be pro- 
tested, in one package, by a notary public, unless the 
president or cashier of the association shall offer to waive 
demand and notice of the protest, and shall, in pursuance 
of such offer, make, sign, and deliver to the party making 
such demand an admission in writing, stating the time 
of the demand, the amount demanded, and the fact of 
the non-payment thereof; and such notary public, on 
making such protest, or upon* receiving such admission, 
shall forthwith forward such admission or notice of pro- 
test to the comptroller of the currency; and after such 
default it shall not be lawful for the association suffering 
the same to pay out any of its notes, discount any notes 
or bills, or otherwise prosecute the business of banking, 
except to receive and safely keep money belonging to it, 
and to deliver special deposits : Provided, however, That if 
satisfactory proof be produced to such notary public that 
the payment of any such notes is restrained by order of 
any court of competent jurisdiction, such notary public 
shall not protest the same; and when the holder of such 
notes shall cause more than one note or package to be 
protested on the same day, he shall not receive pay for 
more than one protest. 

SEC. 26. And be it further enacted, That on receiving 
notice that any such association has failed to redeem any 



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National Monetary Commission 

of its circulating notes, as specified in the next preceding 
section, the comptroller of the currency, with the con- 
currence of the Secretary of the Treasury, may appoint 
a special agent, (of whose appointment immediate notice 
shall be given to such association,) who shall immediately 
proceed to ascertain whether such association has refused to 
pay its circulating notes, in the lawful money of the United 
States, when demanded as aforesaid, and report to the 
comptroller the facts so ascertained; and if, from such 
protest or the report so made, the comptroller shall be 
satisfied that such association has refused to pay its cir- 
culating notes as aforesaid, and is in default, he shall, 
within thirty days after he shall have received notice 
of such failure, declare the United States bonds and 
securities pledged by such association forfeited to the 
United States, and the same shall thereupon be forfeited 
accordingly; and thereupon the comptroller shall imme- 
diately give notice, in such manner as the Secretary of the 
Treasury shall, by general rules or otherwise, direct, to 
the holders of the circulating notes of such association 
to present them for payment at the treasury of the 
United States; and the same shall be paid as presented, 
whereupon said comptroller may, in his discretion, 
cancel an equal amount of bonds pledged by such asso- 
ciation, equal at current market rates, not exceeding par, 
to the notes paid ; and it shall be lawful for the Secretary 
of the Treasury, from time to time, to make such regula- 
tions respecting the disposition to be made of such cir- 
culating notes after presentation thereof for payment 
as aforesaid, and respecting the perpetuation of the 



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evidence of the payment thereof, as may seem to him 
proper; but all such notes, on being paid, shall be can- 
celled; and for any deficiency in the proceeds of the bonds 
pledged by such association, when disposed of as herein- 
after specified, to reimburse to the United States the 
amount so expended in paying the circulating notes of 
such association, the United States shall have a first 
and paramount lien upon all the assets of such associa- 
tion, and such deficiency shall be made good out of such 
assets in preference to any and all other claims whatso- 
ever, except the necessary costs and expenses of admin- 
istering the same. 

SBC. 27. And be it further enacted, That whenever the 
comptroller shall become satisfied, as in the last preceding 
section specified, that any such association has refused 
to pay its circulating notes as therein mentioned, he may, 
instead of cancelling the United States bonds pledged 
by such association, as provided in the next preceding 
section, cause so much of them as may be necessary to 
redeem the outstanding circulating notes of such asso- 
ciation to be sold at public auction in the city of New 
York, after giving thirty days' notice of such sale to 
such association. 

SEC. 28. And be it further enacted, That the comp- 
troller of the currency may, if he shall be of opinion 
that the interests of the United States will be best pro- 
moted thereby, sell at private sale any of the stock so 
transferred to him by such association, and receive there- 
for either money or the circulating notes of such failing 
association : Provided, That no such bonds shall be sold by 



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National Monetary Commission 

private sale for less than the par, nor less than the market 
value thereof at the time of sale. And provided further, 
That no sales of any such stock, either public or private, 
shall be complete until the transfer thereof shall have 
been made with the formalities prescribed in this act. 

SEC. 29. And be it further enacted, That on becoming 
satisfied, as specified in this act, that any such association 
has refused to pay its circulating notes as therein men- 
tioned, and is in default, the comptroller of the currency 
may forthwith appoint a receiver, and require of him such 
bond and security as he shall deem proper, who, under the 
direction of the comptroller, shall take possession of the 
books, records, and assets of every description of such 
association, collect all debts, dues, and claims belonging 
to such association, and, upon the order of a court of 
record of competent jurisdiction, may sell or compound all 
bad or doubtful debts, and, on a like order, sell all the real 
and personal property of such association, on such terms 
as the court shall direct ; and such receiver shall pay over 
all moneys so made to the treasurer of the United States, 
and also make report to the comptroller of the currency 
of all his acts and proceedings. The comptroller shall 
thereupon cause notice to be given, by advertisement in 
such newspapers as he may direct, for three consecutive 
months, calling on all persons who may have claims against 
such association to present the same, and to make legal 
proof thereof; and from time to time the comptroller, 
after full provision shall have been first made for refunding 
to the United States any such deficiency in redeeming the 
notes of such association as is mentioned in this act, shall 



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National Banking System 

make a ratable dividend of the moneys so paid over to him 
by such receiver on all such claims as may have been so 
proved and adjudicated in a court of competent jurisdic- 
tion ; and from time to time, as the proceeds of the assets of 
such association shall be paid over to him, he shall make 
further dividends, as aforesaid, on all claims previously 
proved or adjudicated; and the remainder of such pro- 
ceeds, if any, shall be paid over to the shareholders of such 
association, or their legal representatives, in proportion 
to the stock by them respectively held: Provided, how- 
ever, That if any such association, against which proceed- 
ings have been so instituted on account of any alleged 
refusal to redeem its circulating notes as aforesaid, shall 
deny having failed to do so, such association may at any 
time within ten days after such association shall have been 
notified of the appointment of an agent, as provided in 
this act, apply to the nearest circuit, or district, or terri- 
torial court of the United States, to enjoin further pro- 
ceeding in the premises; and such court, after citing the 
comptroller of the currency to show cause why further 
proceedings should not be enjoined, and after the decision 
of the court or finding of a jury that such association has 
not refused to redeem its circulating notes, when legally 
presented, in the lawful money of the United States, shall 
make an order enjoining the comptroller, and any receiver 
acting under his direction, from all further proceedings on 
account of such alleged refusal. 

SEC. 30. And be it further enacted, That the bonds trans- 
ferred to the treasurer of the United States, as hereinbe- 
fore provided, by any banking association for the security 

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of its circulating notes, shall be held exclusively for that 
purpose, until such notes shall be redeemed, except as pro- 
vided in this act ; but the comptroller of the currency may 
give to any such banking association powers of attorney 
to receive and appropriate to its own use the interest on the 
bonds which shall have been so transferred to the treas- 
urer by it ; but such powers shall become inoperative when- 
ever such banking association shall fail to redeem its cir- 
culating notes as aforesaid; and said comptroller may 
direct the return of any of said bonds to the banking asso- 
ciation which transferred the same, upon the surrender to 
him and the cancellation of a proportionate amount of such 
circulating notes : Provided, That ninety per centum of the 
current market value of the remaining bonds which shall 
have been transferred by the banking association offering 
to surrender such circulating notes shall be equal to the 
amount of all the circulating notes retained by such bank- 
ing association: And provided, further, That there shall 
have been no failure by such association to redeem its cir- 
culating notes, and that there shall have been no other 
violation by such association of any of the provisions of 
this act for the security of the creditors of such associa- 
tion; nor shall the treasurer be required to surrender such 
bonds in fractional sums of less than one thousand dollars ; 
and if, at any time after said bonds shall be deposited 
with the treasurer of the United States, as aforesaid, the 
market or cash value shall be reduced, the comptroller of 
the currency is hereby authorized to demand and receive 
the amount of such depreciation in other United States 
bonds at cash value, or in money, from the association 



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receiving said bills, to be deposited with the treasurer of 
the United States, as long as such depreciation continues. 
SEC. 31. And be it further enacted, That whenever the 
price of any of the bonds pledged as aforesaid for the 
redemption of the circulating notes of any such banking 
association shall be, at the stock exchange in the city of 
New York, for four consecutive weeks, at a rate less than 
that at which they shall have been estimated when so 
pledged, and such depreciation shall not have been made 
good by a deposit of other bonds or money, it shall be the 
duty of the comptroller of the currency to notify the 
treasurer of the United States of such fact, and the pay- 
ment of interest upon such depreciated bonds shall be 
suspended, and such interest shall be retained by said 
treasurer until the same, when added to the current 
market value of the bonds so pledged, to be ascertained 
as before provided, shall be equal to the amount for 
which such bonds were pledged: Provided, That it shall 
be the duty of the comptroller of the currency, at the ex- 
piration of every period of three months, to cause the 
whole of the sums so retained, and then remaining in the 
treasury of the United States, to be invested in United 
States bonds, in the name of the comptroller of the cur- 
rency, in trust for the respective associations by which 
the bonds on which such interest shall have accrued shall 
have been pledged; and whenever the price of such de- 
preciated bonds at the stock exchange in New York shall 
rise to the price at which they were pledged, and so remain 
for four consecutive weeks, such investment shall be 
assigned to such association, and all accruing interest on 



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such pledged bonds shall thereafter be paid to such asso- 
ciation on demand thereof. 

SEC. 32. And be it further enacted, That it shall be the 
duty of the comptroller of the currency to receive worn- 
out or mutilated circulating notes issued by any such 
banking association, and to deliver in place thereof to 
such association other blank circulating notes to an equal 
amount; and such worn-out or mutilated notes, after 
a memorandum shall have been entered in the proper 
books, in accordance with such regulations as may be 
established by the comptroller, as well as all circulating 
notes which shall have been paid or surrendered to be 
cancelled, shall be burned to ashes in presence of three 
persons, one to be appointed by the Secretary of the 
Treasury, one by the comptroller of the currency, and 
one by the treasurer of the United States, under such 
regulations as the Secretary of the Treasury may pre- 
scribe; and in case such notes shall have been delivered 
to the comptroller by an officer or agent of such associa- 
tion, then in the presence, also, of such officer or agent; 
and a certificate of such burning, signed by the parties 
so appointed, shall be made in the books of the comp- 
troller, and a duplicate thereof given to such officer or 
agent. 

Sec. 33. And be it further enacted, That it shall be un- 
lawful for any officer acting under the provisions of this 
act to countersign or deliver to any such association, or 
to any other company or person, any circulating notes 
contemplated by this act, except as hereinbefore pro- 
vided, and in accordance with the true intent and meaning 



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of this act; and any officer who shall violate the pro- 
visions of this section shall be deemed guilty of a high 
misdemeanor, and on conviction thereof shall be pun- 
ished by fine not exceeding double the amount so coun- 
tersigned and delivered, and imprisonment not exceeding 
fifteen years, at the discretion of the court in which he 
shall be tried. 

Sec. 34. And be it further enacted, That all fees for 
protesting the notes issued by any such banking associa- 
tion shall be paid by the person procuring the protest 
to be made, and such banking association shall be liable 
therefor ; but no part of the, stock pledged by such bank- 
ing association, as aforesaid, shall be applied to the 
payment of such fees; and all expenses of any pre- 
liminary or other examinations into the condition of 
any association shall be paid by such association; and 
all expenses of any receivership shall be paid out of 
the assets of such association before distribution of the 
proceeds thereof. 

Sec. 35. And be it further enacted, That the stock- 
holders, collectively, of any such association shall at 
no time be liable to such association, either as principal 
debtors or sureties, or both, to an amount greater than 
three fifths of the capital stock actually paid in and 
remaining undiminished by losses or otherwise; nor 
shall the directors be so liable, except to such amount 
and in such manner as shall be prescribed by the by-laws 
of such association, adopted by its stockholders to regu- 
late such liabilities. 

Sec. 36. And be it further enacted, That the capital 
stock of any association formed under this act shall 

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National Monetary Commission 

be divided into shares of one hundred dollars each, and 
shall be assignable on the books of the association in 
such manner as its by-laws shall prescribe; but no share- 
holder in any association under this act shall have power 
to sell or transfer any share held in his own right so 
long as he shall be liable, either as principal, debtor, 
surety, or otherwise, to the association for any debt 
which shall have become due and remain unpaid, nor 
in any case shall such shareholder be entitled to receive 
any dividend, interest, or profit on such shares so long 
as such liabilities shall continue; but all such dividends, 
interests, and profits shall be retained by the association, 
and applied to the discharge of such liabilities; and 
no stock shall be transferred without the consent of a 
majority of the directors while the holder thereof is 
thus indebted to the association. 

SEC. 37. And be it further enacted, That no banking 
association shall take, as security for any loan or dis- 
count, a lien upon any part of its capital stock; but the 
same security, both in kind and amount, shall be re- 
quired of shareholders as of other persons; and no such 
banking association shall be the purchaser or holder of 
any portion of its capital stock, or of the capital stock 
of any other incorporated company, unless such pur- 
chase shall be necessary to prevent loss upon a debt 
previously contracted in good faith, on security which, 
at the time, was deemed adequate to insure the payment 
of such debt, independent of any lien upon such stock; 
or in case of forfeiture of stock for the non-payment 
of instalments due thereon, and stock so purchased 
or acquired, shall in no case be held by such association 

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so purchasing for a longer period of time than six months, 
if the same can, within that time, be sold for what the 
stock cost. 

Sec. 38. And be it further enacted, That in all elections 
of directors, and in deciding all questions at meetings 
of shareholders, each shareholder shall be entitled to 
one vote on each share of stock held by him; share- 
holders may vote by proxies duly authorized in writing; 
but no officer, clerk, teller, or book-keeper of such asso- 
ciation shall act as proxy; and no stockholder whose 
liability is past due and unpaid shall be allowed to vote. 

Sec. 39. And be it further enacted, That the affairs of 
every such association shall be managed by not less than 
five nor more than nine directors, one of whom shall be 
president of the association; every director shall, during 
his whole term of service, be a citizen of the United 
States and a resident of the state in which such associa- 
tion is located. At least three fourths of the directors 
shall have resided in the state in which such association 
is located one year next preceding their election as di- 
rectors; and each director shall own in his own right, 
at least one per centum of the capital stock of such 
association not exceeding two hundred thousand dollars, 
and the half of one per centum of its capital if over two 
hundred thousand dollars. Each director shall take 
an oath that he will, so far as the duty devolves on him, 
diligently and honestly administer the affairs of such 
association, and will not knowingly violate, or willingly 
permit to be violated, any of the provisions of this act, 
and that he is the bona fide owner, in his own right, of 



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the shares of stock standing in his name on the books 
of the association, and that the same is not hypothecated, 
or in any way pledged, as security for any loan obtained 
or debt owing to the association of which he is a director, 
which oath, subscribed by himself, and certified by the 
officer before whom it is taken, shall be immediately 
transmitted to the comptroller of the currency, and by 
him filed and preserved in his office. 

Sec. 40. And be it further enacted, That the directors of 
any such association first elected shall hold their places 
until their successors shall be elected and qualified. All 
subsequent elections shall be held annually, on such day 
in the month of January as the stockholders of said asso- 
ciation may prescribe; and the directors so elected shall 
hold their places for one year, and until their successors 
are elected and qualified. But any director removing 
from the state, or ceasing to be the owner of the requisite 
amount of stock, shall thereby vacate his place. Any 
vacancy in the board shall be filled by appointment by 
the remaining directors. The director so appointed shall 
hold his place until the next annual election; and if, from 
any cause, an election of directors shall not be made at 
the time appointed, the association shall not for that cause 
be dissolved, but an election may be held on any subse- 
quent day, thirty days' notice thereof having been given 
in a newspaper printed, or of general circulation, in the 
city, town, or county in which the association is located, 
and if no newspaper is published in such city, town, or 
county, such notice shall be published in a newspaper in 
the county adjoining. 



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Sec. 41. And be it further enacted, That every such asso- 
ciation shall at all times have on hand, in lawful money of 
the United States, an amount equal to at least twenty- 
five per centum of the aggregate amount of its outstand- 
ing notes of circulation and its deposits ; and whenever the 
amount of its outstanding notes of circulation and its de- 
posits shall exceed the above-named proportion for the 
space of twelve days, or whenever such lawful money of 
the United States shall at any time fall below the amount 
of twenty-five per centum of its circulation and deposits, 
such association shall not increase its liabilities by mak- 
ing any new loans or discounts otherwise than by dis- 
counting or purchasing bills of exchange, payable at sight, 
nor make any dividend of its profits, until the required 
proportion between the aggregate amount of its outstand- 
ing notes of circulation and its deposits and lawful money 
of the United States shall be restored: Provided, however, 
That clearing-house certificates, representing specie or 
lawful money specially deposited for the purpose of any 
clearing-house association, shall be deemed to be lawful 
money in the possession of any association belonging to 
such clearing-house holding and owning such certificates, 
and considered to be a part of the lawful money which 
such association is required to have, under the foregoing 
provisions of this section : Provided, further, That any bal- 
ance due to any association organized under this act in 
other places from any association in the cities of Boston, 
Providence, New York, Philadelphia, Baltimore, Cin- 
cinnati, Chicago, St Louis, or New Orleans, in good credit, 
subject to be drawn for at sight, and available to redeem 



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their circulating notes and deposits, may be deemed to be 
a part of the lawful money which such association in 
other places than the cities of Boston, Providence, New 
York, Philadelphia, Baltimore, Cincinnati, Chicago, St. 
Louis, and New Orleans, are required to have by the fore- 
going provisions of this section to the extent of three fifths 
of the said amount of twenty-five per centum required. 
And it shall be competent for the comptroller of the cur- 
rency to notify any such association whose lawful money 
reserve, as aforesaid, shall fall below said proportion of 
twenty-five per centum, to make good such reserve; and 
if such association shall fail for thirty days thereafter so 
to make good its reserve of lawful money of the United 
States, the comptroller may, with the concurrence of the 
Secretary of the Treasury, appoint a receiver to wind up 
the business of such association, as provided in this act. 

Sec. 42. And be it further enacted, That no association 
shall at any time be indebted, or in any way liable, to an 
amount exceeding the amount of its capital stock at such 
time actually paid in, and remaining undiminished by 
losses or otherwise, except on the following accounts, that 
is to say: 

First. On account of its notes of circulation. 

Second. On account of moneys deposited with, or col- 
lected by, such association. 

Third. On account of bills of exchange or drafts drawn 
against money actually on deposit to the credit of such 
association, or due thereto. 

Fourth. On account of its liabilities to its stockholders, 
for money paid in on capital stock, and dividends thereon, 
and reserved profits. 

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National Banking System 

SEC. 43. And be it further enacted, That no association 
shall, either directly or indirectly, pledge or hypothecate 
any of its notes of circulation, for the purpose of procur- 
ing money to be paid in on its capital stock, or to be 
used in its banking operations, or otherwise. 

SEC. 44. And be it further enacted, That no association, 
or any member thereof, shall, during the time it shall con- 
tinue its banking operations, withdraw, or permit to be 
withdrawn, either in form of dividends, loans to stock- 
holders for a longer time than six months or in any other 
manner, any portion of its capital; and if losses shall 
at any time have been sustained by any such association 
equal to or exceeding its undivided profits then on hand, 
no dividend shall be made; and no dividend shall ever be 
made by any association, while it shall continue its bank- 
ing operations, to an amount greater than its nett profits 
then on hand, deducting therefrom its losses and bad 
debts; and all debts due to any association, on which 
interest is past due and unpaid for a period of six months, 
unless the same shall be well secured, and shall be in proc- 
ess of collection, shall be considered bad debts within the 
meaning of this act. 

SEC. 45. And be it further enacted, That the directors 
of every association shall semi-annually in the months 
of May and November, declare a dividend of so much of the 
profits of such association as they shall judge expedient; 
and on each dividend day, the cashier shall make, and 
verify by his oath, a full, clear, and accurate statement 
of the condition of the association, as it shall be on that 



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day after declaring the dividend; which statement shall 
contain — 

First. The amount of the capital stock actually paid in 
and then remaining, as the capital stock of such associa- 
tion. 

Secondly. The amount of the circulating notes of such 
association then in circulation. 

Thirdly. The greatest amount in circulation at any 
time since the making of the last previous statement, as 
shall have been exhibited by the weekly statements of the 
cashier, specifying the times when the same occurred. 

Fourthly. The amount of balances and debts of every 
kind due to other banks and banking associations. 

Fifthly. The amount due to depositors. 

Sixthly. The total amount of debts and liabilities of 
every description, and the greatest amount since the mak- 
ing of the last previous statement, specifying the time when 
the same accrued. 

Seventhly. The total amount of dividend declared on the 
day of making the statement. 

Eighthly. The amount of lawful money of the United 
States belonging to the association, and in its possession 
at the time of making the statement. 

Ninthly. The amount subject to be drawn at sight, in 
lawful money of the United States, then remaining on 
deposit with any associations, banks, or bankers; speci- 
fying the amount so on deposit in the cities of Boston, 
Providence, New York, Philadelphia, Baltimore, Cin- 
cinnati, Chicago, St. Louis, and New Orleans. 

Tenthly. The amount then on hand of bills or notes, 
issued by other banks and banking associations. 

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National Banking System 

Eleventhly. The amount of balances due from other 
banks, bankers, and banking associations, excluding 
deposits subject to be drawn at sight as aforesaid. 

Twelfthly. The amount on hand of bills, bonds, stocks, 
notes, and other evidences of debts, discounted or pur- 
chased by the association, specifying particularly the 
amount of suspended debt, the amount considered bad, 
the amount considered doubtful, and the amount in suit 
or judgment. 

Thirteenthly. The value of the real and personal prop- 
erty held for the convenience of the association, specifying 
the amount of each. 

Fourteenthly. The amount of real estate taken in pay- 
ment of debts due to the association. 

Fifteenthly. The amount of the undivided profits of 
the association. 

Sixteenthly. The total amount of the liability to the 
association by the directors thereof collectively, specify- 
ing the gross amount of such liabilities as principal debtors, 
and the gross amount of indorsers or sureties. 

The statement thus made shall forthwith be transmitted 
to the comptroller of the currency. 

SBC. 46. And be it further enacted, That every association 
may take, reserve, receive, and charge on any loan, or dis- 
count made, or upon any note, bill of exchange, or other 
evidence of debt, such rate of interest or discount as is for 
the time the established rate of interest for delay in the 
payment of money, in the absence of contract between the 
parties, by the laws of the several States in which the 
associations are respectively located, and no more: Pro- 



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National Monetary Commission 

vided, however, That interest may be reserved or taken, 
in advance, at the time of making the loan or discount, 
according to the usual rules of banking; and the know- 
ingly taking, reserving, or charging of a rate of interest 
greater than that allowed by this section shall be held and 
adjudged a forfeiture of the debt or demand on which the 
same is taken, reserved, or charged; but the purchase, 
discount, or sale of a bill of exchange, drawn on actually 
existing values, and payable at another place than the 
place of such purchase, discount, or sale, at the current 
discount or premium, shall not be considered as taking, 
reserving, or charging interest. 

Sec. 47. And be it further enacted, That the total lia- 
bilities of any person, or of any company or firm, (includ- 
ing in the liabilities of a company or firm the liabilities of 
the several members thereof,) to any association, including 
liabilities as acceptor of bona fide bills of exchange, pay- 
able out of the state where the association is located, 
shall at no time exceed one third; exclusive of liabilities 
as acceptor, one fifth; and exclusive of liabilities on such 
bills of exchange, one tenth part of the amount of the 
capital stock of such association actually paid in. 

Sec. 48. And be it further enacted, That no association 
shall, at any time, pay out on loans or discounts, or in 
purchasing drafts or bills of exchange, or in payment of 
deposits, nor shall it in any other mode put in circulation 
the notes of any bank or banking association, which 
notes shall not, at any such time, be receivable, at par, 
on deposit, and in payment of debts by the association so 
paying out or circulating such notes; nor shall it know- 



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National Banking' System 

ingly pay out or put in circulation any notes issued by 
any bank or banking association which at the time of 
such paying out or putting in circulation is not redeeming 
its circulating notes in lawful money of the United States. 

SEC. 49. And be it further enacted, That all transfer of 
the notes, bonds, bills of exchange, and other evidences of 
debt owing to any association, or of deposits to its credit; 
all assignments of mortgages, sureties on real estate, or of 
judgments or decrees in its favor; all deposits of money, 
bullion, or other valuable things for its use, or for the use 
of any of its shareholders or creditors; and all payments 
of money to either, made after the commission of an 
act of insolvency, or in contemplation thereof, with a view 
to prevent the application of its assets in the manner 
prescribed by this act, or with a view to the preference 
of one creditor to another, except in payment of its 
circulating notes, shall be utterly null and void. 

SEC. 50. And be it further enacted, That if the directors 
of any association shall knowingly violate, or knowingly 
permit any of the officers, agents, or servants of the asso- 
ciation to violate any of the provisions of this act, all 
the rights, privileges, and franchises of the association, 
derived from this act shall be thereby forfeited; such 
violation shall, however, be determined and adjudged 
by a proper circuit, district, or territorial court of the 
United States, before the association shall be declared 
dissolved; and in cases of such violation, every director 
who participated in or assented to the same shall be 
held liable in his personal and individual capacity for all 
damages which the association, its shareholders, or any 



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other person, shall have sustained in consequence of 
such violation. 

Sec. 51. And, be it further enacted, That the comptroller 
of the currency, with the approbation of the Secretary of 
the Treasury, as often as shall be deemed necessary or 
proper, shall appoint a suitable person or persons to make 
an examination of the affairs of every banking association, 
which person shall not be a director or other officer in 
any association whose affairs he shall be appointed to 
examine, and who shall have power to make a thorough 
examination into all the affairs of the association, and; in 
doing so, to examine any of the officers and agents thereof 
on oath, and shall make a full and detailed report of the 
condition of the association to the comptroller; and the 
association shall not be subject to any other visitorial 
powers than such as are authorized by this act, except 
such as are vested in the several courts of law and chancery. 
And every person appointed to make such examination 
shall receive for his services at the rate of five dollars for 
each day by him employed in such examination, and two 
dollars for every 'twenty-five miles he shall necessarily 
travel in the performance of his duty, which shall be 
paid by the association by him examined. 

Sec. 52. And be it further enacted, That every president, 
director, cashier, teller, clerk, or agent of any association, 
who shall embezzle, abstract, or wilfully misapply any of 
the moneys, funds, or credits of the association, or shall, 
without authority from the directors, issue or put in cir- 
culation any of the notes of the association, or shall, 
without such authority, issue or put forth any certificate 



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of deposit, draw any order or bill of exchange, make any 
acceptance, assign any note, bond, draft, bill of exchange, 
mortgage, judgment, or decree, or shall make any false 
entry in any book, report, or statement of the association, 
with intent, in either case, to injure or defraud any other 
company, body politic, or corporate, or any individual per- 
son, or to deceive any officer or agent appointed to examine 
the affairs of any such association, shall be deemed guilty 
of a misdemeanor, and upon conviction thereof shall be 
punished by imprisonment not less than five nor more 
than ten years. 

Sec. 53. And be it further enacted, That the president 
and cashier of every such association shall cause to be 
kept at all times a full and correct list of the names and 
residences of all the shareholders in the association in 
the office where its business is transacted; and such list 
shall be subject to the inspection of all the shareholders 
and creditors of the association during business hours 
of each day in which business may be legally transacted; 
and a copy of such list, verified by the oath of such presi- 
dent or cashier, shall, at the beginning of every year, be 
transmitted to the comptroller of the currency, com- 
mencing on the first day of the first quarter after the 
organization of the association. 

Sec. 54. And be it further enacted, That the Secretary 
of the Treasury is hereby authorized, whenever., in his 
judgment, the public interests will be promoted thereby, 
to employ any of such associations doing business under 
this act as depositaries of the public moneys, except 
receipts from customs. 

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National Monetary Commission 

SEC. 55. And be it further enacted, That all suits and pro- 
ceedings arising out of the provisions of this act, in which 
the United States or its officers or agents shall be parties, 
shall be conducted by the district attorneys of the sev- 
eral districts, under the direction and supervision of the 
solicitor of the treasury. 

Sec. 56. And be it further enacted, That every person 
who shall mutilate, cut, deface, disfigure, or perforate 
with holes, or shall unite or cement together, or do any 
other thing to any bank bill, draft, note, or other evidence 
of debt issued by any such association, or shall cause or 
procure the same to be done, with intent to render such 
bank bill, draft, note, or other evidence of debt, unfit to 
be reissued by said association, shall upon conviction 
forfeit fifty dollars to the association who shall be in- 
jured thereby, to be recovered by action in any court 
having jurisdiction. 

Sec. 57. And be it further enacted, That if any person 
shall falsely make, forge, or counterfeit, or cause or pro- 
cure to be made, forged, or counterfeited, or willingly 
aid or assist in falsely making, forging, or counterfeiting, 
any note in imitation of, or purporting to be in imitation 
of, the circulating notes issued under the provisions of 
this act, or shall pass, utter, or publish, or attempt to 
pass, utter, or publish any false, forged, or counterfeited 
note, purporting to be issued by any association doing 
a banking business under the provisions of this act, know- 
ing the same to be falsely made, forged, or counterfeited, 
or shall falsely alter, or cause or procure to be falsely 
altered, or willingly aid or assist in falsely altering, any 

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such circulating notes, issued as aforesaid, or shall pass, 
utter or publish, or attempt to pass, utter or publish 
as true, any falsely altered or spurious circulating note, 
issued or purporting to have been issued as aforesaid, 
knowing the same to be falsely altered or spurious, every 
such person shall be deemed and adjudged guilty of 
felony, and being thereof convicted by due course of 
law, shall be sentenced to be imprisoned and kept at 
hard labor for a period not less than five years nor more 
than fifteen years, and to be fined a sum not exceeding 
one thousand dollars. 

SBC. 58. And be it further enacted, That if any person 
shall make or engrave, or cause or procure to be made 
or engraved, or shall have in his custody or possession 
any engraved plate or block after the similitude of any 
plate from which any circulating notes issued as aforesaid 
shall have been printed, with intent to use such plate 
or block, or cause or suffer the same to be used, in forging 
or counterfeiting any of the notes issued as aforesaid, 
or shall have in his custody or possession any blank note 
or notes engraved and printed after the similitude of 
any notes issued as aforesaid, with intent to use such 
blanks, or cause or suffer the same to be used, in forging 
or counterfeiting any of the notes issued as aforesaid, 
or shall have in his custody or possession any paper 
adapted to the making of such notes, and similar to the 
paper upon which any such notes shall have been issued, 
with intent to use such paper, or cause or suffer the 
same to be used, in forging or counterfeiting any of the 
notes issued as aforesaid, every such person, being thereof 



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National Monetary Commission 

convicted by due course of law, shall be sentenced to 
be imprisoned and kept to hard labor for a term not 
less than five nor more than fifteen years, and fined in a 
sum not exceeding one thousand dollars. 

SEC. 59. And be it further enacted, That suits, actions, 
and proceedings by and against any association under 
this act may be had in any circuit, district, or territorial 
court of the United States held within the district in 
which such association may be established. 

Sec. 60. And be it further enacted, That it shall be 
the duty of the comptroller of the currency to report 
annually to Congress, at the commencement of its session — 

First. A summary of the state and condition of every 
association from whom reports have been received the 
preceding year, at the several dates to which such reports 
refer, with an abstract of the whole amount of banking 
capital returned by them, of the whole amount of their 
debts and liabilities, the amount of circulating notes 
outstanding, and the total amount of means and resources, 
specifying the amount of specie held by them at the times 
of their several returns, and such other information in 
relation to said associations as, in his judgment, may be 
useful. 

Second. A statement of the associations whose business 
has been closed during the year, with the amount of 
their circulation redeemed, and the amount outstanding. 

Third. To suggest any amendment to the laws relative 
to banking by which the system may be improved, and 
the security of the bill-holders and depositors may be 
increased. 



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National Banking System 

Fourth. To report the names and compensation of 
the clerks employed by him, and the whole amount of 
the expenses of the banking department during the 
year; and such report shall be made by or before the 
first day of December in each year, and the usual number 
of copies for the i^e of the Senate and House, and one 
thousand copies for the use of the Department, shall 
be printed by the public printer and in readiness for 
distribution on the first meeting of congress. 

SEC. 6i. And be it further enacted, That any banking 
association or corporation lawfully in existence as a bank 
of circulation on the first day of January, anno Domini 
eighteen hundred and sixty-three, organized in any state, 
either under a special act of incorporation or a general 

banking law, may, at any time within years after the 

passage of this act become an association under the pro- 
visions of this act; that in such case the certificate of 
association provided for by this act shall be signed by 
the directors of such banking association or corporation, 
and in addition to the specifications required by this 
act, shall specify that such directors are authorized by 
the owners of two thirds of the capital stock of such 
banking association or corporation, to make such certifi- 
cate of association, and such certificate of association 
shall thereafter have the same effect, and the same pro- 
ceedings* shall be had thereon, as is provided for as to 
other associations organized under this act. And such 
association or corporation thereafter shall have the same 
powers and privileges, and shall be subject to the same 
duties, responsibilities, and rules, in all respects, as is [are] 



195 



National Monetary Commission 

prescribed in this act for other associations organized 
under it, and shall be held and regarded as an association 
under this act. 

Sec. 62. And be it further enacted, That any bank or 
banking association, authorized by any State law to 
engage in the business of banking, ajid duly organized 
under such State law at the time of the passage of this act, 
and which shall be the holder and owner of United States 
bonds to the amount of fifty per centum of its capital 
stock, may transfer and deliver to the treasurer of the 
United States such bonds, or any part thereof, in the 
manner provided by this act; and upon making such 
transfer and delivery, such bank or banking association 
shall be entitled to receive from the comptroller of the 
currency, circulating notes, as herein provided, equal in 
amount to eighty per centum of the amount of the bonds 
so transferred and delivered. 

Sec. 63. And be it further enacted, That upon the failure 
of any such State bank or banking association, to redeem 
any of its circulating notes issued under the provisions 
of the preceding section, the comptroller of the currency 
shall, when satisfied that such default has been made, 
and within thirty days after notice of such default, pro- 
ceed to declare the bonds transferred and delivered to 
the treasurer, forfeited to the United States, and the 
same shall thereupon be forfeited accordingly. And 
thereupon the circulating notes which have been issued 
by such bank or banking association shall be redeemed 
and paid at the treasury of the United States, in the same 
manner as other circulating notes issued under the pro- 
visions of this act are redeemed and paid 

196 



National Banking System 

Sec. 64. And be it further enacted, That the bonds for- 
feited, as provided in the last preceding section, may be 
cancelled to an amount equal to the circulating notes 
redeemed and paid, or such bonds may be sold, under the 
direction of the Secretary of the Treasury, and after retain- 
ing out of the proceeds a sum sufficient to pay the whole 
amount of circulating notes, for the redemption of which 
such bonds are held, the surplus, if any remains, shall be 
paid to the bank, or banking association from which such 
bonds were received. 

SEC. 65. And be it further enacted, That Congress re- 
serves the right, at any time, to amend, alter, or repeal 
this act. 

Approved, February 25, 1863. 



197 



Appendix C. 

Section seven of "An Act to provide Ways and Means for 
the Support of the Government ", approved March 3, 1863. 

SEC. 7. And be it further enacted, That all banks, asso- 
ciations, corporations, or individuals, issuing notes or bills 
for circulation as currency, shall be subject to and pay a 
duty of one per centum each half year from and after 
April first, eighteen hundred and sixty-three, upon the 
average amount of circulation of notes or bills as currency 
issued beyond the amount hereinafter named, that is to 
say: banks, associations, corporations, or individuals, hav- 
ing a capital of not over one hundred thousand dollars, 
ninety per centum thereof; over one hundred thousand 
and not over two hundred thousand dollars, eighty per 
centum thereof; over two hundred thousand and not over 
three hundred thousand dollars, seventy per centum 
thereof; over three hundred thousand and not over five 
hundred thousand dollars, sixty per centum thereof; over 
five hundred thousand and not over one million of dollars, 
fifty per centum thereof ; over one million and not over one 
million and a half of dollars, forty per centum thereof; 
over one million and a half, and not over two millions of 
dollars, thirty per centum thereof; over two millions of 
dollars, twenty-five per centum thereof. In the case of 
banks with branches, the duty herein provided for shall be 
imposed upon the circulation of the notes or bills of such 
branches severally, and not upon the aggregate circulation 

199 



National Monetary Commission 

of all; and the amount of capital of each branch shall be 
considered to be the amount allotted to or used by such 
branch; and all such banks, banking associations, corpora- 
tions, and individuals shall also be subject to and pay a 
duty of one half of one per centum each half year from 
and after April first, eighteen hundred and sixty-three, 
upon the average amount of notes or bills not otherwise 
herein taxed and outstanding as currency during the six 
months next preceding the return hereinafter provided for ; 
and the rates of tax or duty imposed on the circulation 
of associations which may be organized under the act 
"to provide a national currency, secured by a pledge of 
United States stocks, and to provide for the circulation 
and redemption thereof," approved February twenty- 
fifth, eighteen hundred and sixty-three, shall be the same 
as that hereby imposed on the circulation and deposits 
of all banks, associations, corporations, or individuals, 
but shall be assessed and collected as required by said 
act; all banks, associations, or corporations, and indi- 
viduals issuing or reissuing notes or bills for circulation 
as currency after April first, eighteen hundred and sixty- 
three, in sums representing any fractional part of a dollar, 
shall be subject to and pay a duty of five per centum each 
half year thereafter upon the amount of such fractional 
notes or bills so issued. And all banks, associations, cor- 
porations, and individuals receiving deposits of money 
subject to payment on check or draft, except savings insti- 
tutions, shall be subject to a duty of one eighth of one per 
centum each half year from and after April first, eighteen 
hundred and sixty-three, upon the average amount of such 



National Banking System 

deposits beyond the average amount of their circulating 
notes or bills lawfully issued and outstanding as currency. 
And a list or return shall be made and rendered within 
thirty days after the first day of October, eighteen hundred 
and sixty-three, and each six months thereafter, to the 
commissioner of internal revenue, which shall contain a 
true and faithful account of the amount of duties accrued, 
or which should accrue, on the full amount of the frac- 
tional note circulation and on the average amount of all 
other circulation and of all such deposits, for the six 
months next preceding. And there shall be annexed to 
every such list or return a declaration, under oath or affir- 
mation, to be made in form and manner as shall be pre- 
scribed by the commissioner of internal revenue, of the 
president, or some other proper officer of said bank, associa- 
tion, corporation, or individual, respectively, that the same 
contains a true and faithful account of the duties which 
have accrued, or which should accrue, and not accounted 
for ; and for any default in the delivery of such list or return, 
with such declaration annexed, the bank, association, cor- 
poration, or individual making such default, shall forfeit, 
as a penalty, the sum of five hundred dollars. And such 
bank, association, corporation, or individual shall, upon 
rendering the list or return as aforesaid, pay to the com- 
missioner of internal revenue the amount of the duties 
due on such list or return, and in default thereof shall for- 
feit, as a penalty, the sum of five hundred dollars; and in 
case of neglect or refusal to make such list or return as 
aforesaid, or to pay the duties as aforesaid, for the space 
of thirty days after the time when said list should have 



National Monetary Commission 

been made or rendered, or when said duties shall have 
become due and payable, the assessment and collection 
shall be made according to the general provisions pre- 
scribed in an act entitled "An act to provide internal rev- 
enue to support the Government and to pay interest on 
the public debt", approved July one, eighteen hundred 
and sixty -two. 



20a 



INDEX 



Account of the private life and public service of Salmon Portland Chase, by 

R. B. Warden, 65, 98. 
Act to provide internal revenue to support the Government, 43, 202. 
Act to provide ways and means for the support of the Government, 84, 85, 

101, 199. 
Advantage of the national banking system, etc., by George Walker, 105. 
Alburtis, E. K., favors legal-tender emissions, 52. 
Alley, John B., Member of Congress, favored the bill, 82. 
Analectic Magazine, 9, 11. 

Andrew, John A., governor of Massachusetts, letter from Mr. Hooper, 89. 
Antietam, battle of, settles invasion of Pennsylvania, 88. 
Appletons' Cyclopaedia, 59. 
Aspinwall, William H., letter from Mr. Chase stopping negotiation of 

loan, 89. 
Assignats of French Republic, 4, 18. 

B. 

Baker, Stephen, Member of Congress, said the bill would do no immediate 

good, 82. 
Baltimore, 54, 127, 142, 145, 170, 183, 184, 186. 
Bank of England, 66. 
Bank of the United States, 28, 46. 
Bankers' Association, 55. 
Bankers' Magazine, prints " Outline of a plan to create a national currency," 

10; shows character of currency expansion, 17; quoted, 21; counterfeits 

difficult to detect, 26; Amasa Walker's speech, 90; George Walker's 

communication, 105. 
Bayley, Rafael Arroyo, his "National loans of the United States" quoted, 

41. 
Bigelow, John, letter from Mr. Chase, 65. 
Bill to provide national currency secured by a pledge of United States 

stocks, etc., 56, 72, 113. 
Bills of state banks, cause trouble traveling, 9; some of them good, 12; 

limited circulation, 13; some doubtful, 14; exchange on, 15; losses by 

16; ragged and doubtful, 17; torn and greasy, 18; rates of exchange, 19; 

governors protest, 20, 21; counterfeits, 23, 24, 25, 26; restriction and 

inspection, 27. 

203 



National Monetary Commissio 



n 



Biography of William Cullen Bryant, etc., 70. 

Bixby, William K., loans Harrington papers, 6. 

Bloodgood, S. De Witt, letter from Mr. Chase, 100. 

Bonnefoux, L., originator of New York State Security Bank, 10. 

Boston, 13; par currency of, 14; banks respected, 1 7 ; exchange on unset- 

- tied, 19; mentioned, 45, 69, 74, 89, 92, 127, 142, 145, 170, 183, 184, 186. 

Boston Evening Transcript, 66. 

Boston Public Library, 57, 60. 

Brightly, Frederic Charles, his digest of the laws of the United States cited, 

28. 
Brooklyn, 6^,. 

Brown, James, criticises Mr. Chase's report, 51 ; suggests a plan, 63. 
Bryant, William Cullen, letter from Mr. Chase, 70, 103. 
Buchanan, James, President, etc., 34. 
Buckner, Aylett Hawes, chairman Committee on Banking and Currency, 

57, 58. 
Bush, Isidor, explains finance report to Germans, 53. 



C, J. B., signature to article in New Bedford Mercury, 11. 

Caldwell, John W., wants national debt put in form of money, 49. 

Cambridge, Mass., 6. 

Campbell, Alexander, La Salle, favors emission of noninterest-bearing 
Treasury notes, 44. 

Canada, "wild-cats" of, 14. 

Carson, Enoch T., expresses sympathy, 64. 

Certificates of indebtedness, 42. 

Chancellorsville, battle of, 88. 

Chandler, Zachariah, United States Senator, would vote for prohibitory 
tax, 96. 

Chase, Salmon Portland, Secretary of the Treasury, 3, 5, 6, 7, 15, points 
out defects of currency, 16; his inaugural address as governor, 21, 23, 26, 
28, 30; his 1861 finance reports, 32, 33, 34, 35; annual finance report 1861, 
37, 38; national finances, 40; estimates short, 41, 42; objects to legal- 
tender notes, 43; his correspondence, 44, 45, 48, 49, 51, 52, 53, 54 55, 
57, 58, 59, 62, 63, 64, 65, 66; 1862 finance report, 67, 69, 70, 71, 73, 
74> 75. 76, 77, 78, 79, 88, 89; speaks in Ohio and Indiana, 91, 92; 1863 
report, 93, 95, 96, 97, 98, 99; insists on exclusive national currency, 100; 
his opinions discussed, 103, 104, 105, 106, 107, 108, 109, no, in, 112. 

Chicago, 13, 17, 49, 50, 63, 86, 170, 183, 184, 186. 

Chicago Tribune, describes condition of currency, 1 7 ; deals with counter- 
feits, 25, 51; quotes R. J. Walker 64, 65, 96. 

Cincinnati, 49, 51, 65, 76, 91, ioo, 127, 142, 145, 170, 183, 184, 186. 

Cincinnati Gazette, 100. 

Cisco, John J., urged to procure support of New York bankers, 69. 

204 



National Banking System 

Coin certificates, 42. 

Columbus, Ohio, 21. 

Compilation of the messages and papers of presidents, by J. D. Richard- 
son, 72. 

Compound interest notes, 35. 

Congressional Globe, 14, 35, 39, 73, 74, 79, 81, 82. 

Connecticut, adops free banking, 12. 

Continental bills, 4. 

Cooke, Henry D., aids Mr. Chase, 71 ; writes that Sherman will support the 
bill, 75; claims that he secured Sherman, 78, 79, 85. 

Cooke, Jay, his memoirs quoted, 19, 71, 75, 78, 85; writes New York Tri- 
bune, 105. 

Cornell, Alonzo B., governor New York, 56. 

Corning, Erastus, Member of Congress, 55. 

Counterfeit detectors, 24, 25. 

D. 

Davis, Andrew McF., 6. 

Day, Timothy C, letter from Mr. Chase, 77. 

Depositories. (See Government depositories.) 

District of Columbia, 164. 

Doolittle, James R., United States Senator, wants banks taxed out of ex- 
istence, 49; would sustain the bill, 81. 

Dunbar, Charles F., his Economic Essays, 12, 24, 27. 



Economic Essays, by Charles F. Dunbar, 12, 24, 27. 

Eggleston, Benjamin, letter from Mr. Chase, 89. 

England, 45. 

Europe, 4, 13, 34, 90. 

Everitt, John L., of committee of New York Clearing House, 96. 

Extra sheets from Spaulding's history of legal-tender paper money, 30. 



Federal Government, refuses to receive paper money, 15. 

Felton, Samuel M., offers to make use of Treasury notes, 49. 

Fenton, Reuben E., Member of Congress, would give the bill his support, 82. 

Fessenden, William P., United States Senator, correspondence with Mr. 

Chase, 65, 71, 72, 76. 
Fillmore, Millard, President, etc., when comptroller of New York suggested 

secured currency, 10. 
Finance Committee, United States Senate, 76, 99. 
Finance reports, 32, 67, 93. 
Financial situation affects opinions, 40. 
Fiske & Hatch, New York bankers, 91. 
Five-twenty bonds, 35, 41, 68, 105. 
Florida, adopts free banking, 12; mention, 47. 

205 



National Monetary Commission 

Forbes, John M., Mr. Chase stops negotiation of loan, 89. 

Fort, George F., governor of New Jersey, his opinions quoted under the 

name of Governor Lord, 21. 
Fractional currency 42. 
France, 4. 

Fredericksburg, battle of, 88. 
Freeman, Pliny, letter from Mr. Chase, 98. 



Gallagher, William D., commends finance report, 51. 

Gallatin, James, 59. 

Gallipolis, Ohio, 49. 

Georgia, "wildcats" of, 14. 

Germantown, Ohio, 49. 

Goodale, S. N., favors interest-bearing Treasury notes, 44. 

Gorum, G. W., has plan for nationalizing banks, 51, 55. 

Government depositories, what could be received, 28, 30, 31, 60, 68, 74, 

75, 78, 80, in. 
Greeley, Horace, approves the bill, 76; Mr. Chase writes him, 100. 
Greenbacks, 42, 43, 53, 79. 

Gunckel, William, sees United States note for the first time, 49. 
Gurley, John R., Member of Congree, opposes Mr. Chase, 73. 

H. 

Hamilton, John C, calls attention to opposition to Mr. Chase's plan, 65. 

Hart, Albert Bushnell, his life of Chase, 104. 

Harrington, George, assistant treasurer, 5, 6, 91, 93, 95, 96. 

Harvard University Library, 91. 

Hecksher, Charles A., letters from Mr. Chase, 75, 98. 

Henderson, John B., United States Senator, would vote for the bill, 81. 

Historical Magazine, 9, 11. 

History of the legal- tender paper money, by E. G. Spaulding, 56, 57, 91. 

Hooper, Samuel, Member of Congress, his speech in 1869, 35; his speech in 
I 863, 39; on Subcommittee of Ways and Means, 55; introduces a bill, 
56; similar to Spaulding bill, 61, 62 ; incloses articles from London Globe, 
66, 70; introduces another bill, 72; speech, 73; took charge of bill, 87; 
letter, 89; incloses slips from London Examiner, 92; letter quoted, 95; 
letter from Mr. Chase, 97; praise from Mr. Chase, 99; market not pre- 
dominant motive, no; how rebellion supported, in. 

Hooper bill, analysis of, 83; no liability for stockholders, 85; section 31 
dropped, 86, 97; reprint, 113; currency department established, 113; 
seal of office, 114; rooms assigned, 115; United States bonds defined, 
115; number of persons in association, 115; form of certificate, in- 
payment of capital, 117; failure to pay, 117; issuance of certificate, 119; 

206 



National Banking System 



powers of association, 119; shares, 120; increase of capital, 120; rights of 
association, 121; deposit of bonds, 121 ; circulating notes, 122; engraved 
plates, 122; payment for plates, 123; receivable for public dues, 124; 
mutual checks Treasurer and Comptroller, 125; annual certificates, 126; 
quarterly report, 126; failure to redeem, 128; forfeiture and cancellation 
of bonds, 129; public sale of bonds, 130; private sale of bonds, 131 ; clos- 
ure, 131; return of bonds, 133; decline of bonds, 134; voluntary closure, 
135; mutilated bills, 136; illegal emissions, 137; protest fees, 137; stock- 
holders borrowing limit, 137; shares defined, 138; association not to pur- 
chase own stock, 138; voting powers, 139; directors, 139; term of office, 
140; redemption funds, 141; limit of liabilities, 142; pledge of notes for- 
bidden, 143; dividends only from profits, 143; dividend statement, 143; 
interest rates, 145 ; limit for borrowers, 146; use of certain bills prohibited 
147; no preferences to creditors, 147; penalty for violating act, 148; ex- 
amination of affairs, 148; embezzlement, 148; list of shareholders, 149; 
depositories, 150; suits against government officers, 150; penalty for 
mutilating bills, 150; counterfeiting, 150; intent to counterfeit, 151; 
jurisdiction, 152; Comptroller's report, 152; appropriation for expense, 

i53- 
Hunt's Merchants' Magazine, shows difficulty of travel from lack of uni- 
form currency, 13; losses of bill holders, 16; article on counterfeits, 24, 52. 

I. 

Illinois, adopts free banking, 12; "not-to-be-forgotten slump tails" of, 14; 

bank failures, 15; banks without capital, 18. 
Inaugural address of S. P. Chase, as governor of Ohio, 21. 
Independent, The, losses of merchants from lack of uniform currency, 13. 
Indiana, adopts free banking, 12; "red dogs" of, 14; governor's message, 20 
Indianapolis, 20, 91, 92. 
Internal-revenue act, 43, 202. 
Iowa, adopts free banking, 12. 

J- 

Jackson, Andrew, President, etc., issues specie circular, 29. 

Jay Cooke, financier of the civil war, etc., by E. P. Oberholtzer, 19, 7 t, 75, 78. 

Jordan, Edward, Solicitor of the Treasury Department, 6; prepares a bill, 
58, 59, 61. 

K. 

Kansas, 80. 

Kellogg, L. U., recommends emission of noninterest-bearing treasury notes, 
44. 

Kentucky, miserably engraved notes of, 14. 

Ketchum, Morris, indorses Mr. Chase, 66. 

Knox, John Jay, author of article in Hunt's Merchants' Magazine, after- 
wards Comptroller of the Currency, 14, 52 ; report cited, 55. 

29582—10 14 207 



National Monetary Commission 

l. 

La Salle, 111., 44. 

Lancaster, Ohio, 53. 

Latham, Alfred, governor of Bank of England, 66. 

Law's Mississippi Bubble, 4. 

Legal-tender treasury notes, authorized, 42; Mr. Chase's opposition, 43; 

demand notes should be, 54; furnish uniform currency, 73. 
Letter on (the) national currency, etc., attributed to Eleazer Lord, 50. 
Levitt, Rev. Joshua, letter from Mr. Chase, 99. 
Library of Congress, 6, 44, 45, 49, 51, 52, 53, 54, 59, 63, 64, 69, 74. 
Life and public services of Salmon P. Chase, etc., by J. W. Schuckers, 69, 75, 

76, 97, 100, 103. 
Lincoln, Abraham, President, etc., 34; appeals for borrowing power, 41; 

urges uniform currency, 72, 78; approves the bill, 82; letter from Mr. 

Chase, 100. 
Littell, Eliakim, subtreasury drafts for currency, 45, 64. 
Littell's Living Age, 45. 
Liverpool, England, 89. 
London, England, 13, 89. 
London Examiner, 92. 
Loudon Globe, 66. 
London Times, 14. 

Lord, Eleazar, his letter on the national currency act, etc., quoted, 50, 54. 
Lord, Governor, of New Jersey, a misprint in Bankers' Magazine, should be 

Ford, 21. 
Louisiana, adopts free banking, 12. 
Lovejoy, Owen, Member of Congress, would tax banks out of existence, 

74, 96. 

M. 

McClellan, Gen. George B., failure of peninsula campaign, 87. 

Maine, worthless issues of banks, 14; mention, 47. 

Mansfield, Edward D., letter to Mr. Chase, 98. 

Market for bonds, 9, 10; devices of Mr. Chase, 34; forms of securities, 35; 

importance of, 38, 60, 68; not referred to in Mr. Chase's western speeches, 

92; actual predominant motive, 108, 109. 
Martin, John D., advocates emission of greenbacks, 53. 
Massachusetts, Massachusetts Bay, 4; adopts free banking, 12; redemption 

of local bills, 12; mention, 27, 82, 89, 99. 
Mechanics and Farmers' Bank, Albany, 77. 
Medill, Joseph, urges circulation of demand notes, 50; letter, 51, 65; letter 

from Mr. Chase, 69; mention, 96, 98. 
Mellen, William P., letter from Mr. Chase, 76. 
Merchants' Magazine. (See Hunt's Merchants' Magazine.) 
Metropolitan Bank, New York, 30. 
Mexico, 47. 

208 



National Banking S y s t 



e m 



Michigan, "shinplasters" of, 14; governor's message, 21. 

Military situation influences votes, 87. 

Mississippi Blatter, 53. 

Missouri, miserably engraved notes of, 14; bonds used by Illinois banks, 18. 

Money and banking, by Horace White, 104. 

Morrill, Justin, United States Senator, opposed Mr. Chase, 73. 

Mozart Hall, Cincinnati, 91. 

Munich, Bavaria, 13. 

Mutual Redemption Bank, Boston, redeems for country banks, 12 

N. 

Nash, Simeon, wants Government to receive state bills, 49. 

National bank act. (See Sherman Act.) 

National banks, suggested, 36; Portland, Me, applies for one, 90; one in proc- 
ess in San Francisco, 90; coming on well in San Francisco and New 
Orleans, 93; promote sentiment of nationality, 111; identify moneyed 
institutions with Government, 112; strengthen the Union, 112. 

National currency, early suggestions, 9, 10, 16; bill to provide, 56; argu- 
ments in favor, 60; act to provide power, 82; should be exclusive, 100; 
new act of same name, 101, 155. 

National currency, the, its origin, by O. B. Potter, 48. 

National Intelligencer, Washington, D. C, troubles of travelers for lack of 
uniform currency, 13; losses by failures of banks, 15. 

National loans of the United States, by R. A. Bayley, 41. 

Nebraska, "red dogs" of, 14. 

New Bedford Mercury, 1 1 . 

New England, 12, 14, 17, 27. 

New Jersey, adopts free banking, 12; banks a menace, 17; governor's mes- 
sage, 21. 

New Orleans, national bank being organized, 93 ; mentioned, 127, 142, 145, 
170, 183, 184, 186. 

New York, State of, 7, 8, 9, 10; safety fund and free banking acts, 11; 
secured bank notes circulate freely, 12; par currency of, 14; many 
banks of same name, 26; mention, 45, 56, 82. 

New YorkCity, 5, 13, 17, 19, 26, 48, 50, 51, 52, 54, 57, 58, 59, 66, 70, 89, 93, 
96, 99, 100, 127, 130, 131, 134, 142, 145, 170, 177, 183, 184, 186. 

New York clearing house, attacks national banks, 95. 

New York Graphic, 58, 59. 

New York Journal of Commerce, is satirical, 38, 69. 

New York state banking department, 65. 

New York State Stock Security Bank, 10. 

New York Times, 64. 

New York Tribune, 105, 112. 

New York World, 88. 

Newark, N. J., 51. 

North Brookfield, Mass., 52. 

209 



National Monetary Commission 



North Carolina, miserably engraved notes of, 14. 

Northwest Territory, 28. 

Northwestern States, 15. 

Notes explanatory of the system, etc., by S. M. Stilwell, 58, 59, 60. 

O. 

Oberholzer, Ellis Paxson, his Jay Cooke, financier of the civil war, quoted, 

i9> 7i> 75, 78. 

Ohio, adopts free banking, 12; banks a menace, 17; governor's inaugural, 
21,31; mention, 44, 53, 91. 

Olcott, Thomas W., letter to Mr. Chase, 77, 78; letter from Mr. Chase, 98. 

One hundred years of banking, Mr. Spaulding's address to Banker's Associa- 
tion, 55. 

Oregon, 46, 47. 

Origin of the national-banking system, etc., by Jay Cooke, 105. 

P. 
Paris, France, 11, 13. 

Parton, James, his life of Andrew Jackson, 2Q. 
Pennsylvania, adopts free banking, 12; " wildcats" of, 14; banks a menace, 

17; invasion checked, 88. 
Pennsylvania Historical Society, 6, 34, 50, 51, 65, 66, 69, 76, 77, 89, 92, 93, 

97, 98, 99, 100. 
Pennsylvania Railroad, will cooperate in use of Treasury notes, 50. 
Philadelphia, 9, 17, 19, 49, 71, 127, 142, 145, 170, 184. 
Philadelphia and Reading Railroad Company will use Treasury notes, 50. 
Philadelphia Bulletin, sums up advantages, 77. 
Philadelphia, Wilmington and Baltimore Railroad Company, 49. 
Plan for appreciating the national-bank notes to the value of coins, etc., by 

O. B. Potter, 48. 
Plan of the national-bank currency, etc., by O. B. Potter, 48. 
Pomeroy, Samuel C, United States Senator, moved vote for the bill, 80. 
Portland, Me., applies for bank, 90. 
Post-Office Department, to be paid in coin, 29. 
Potter, Orlando Bronson, submits a plan, 45, 46, 47, 48, 54. 
Private history of the origin and purpose of the national-banking law, etc., 

by S.M. Stilwell, 57. 
Providence, R. I., 86, 170, 183, 184, 186. 

R. 

Report of the Secretary of the Treasury, A revolution in our monetary 

system, by Isidor Bush, 53. 
Report on the national bank currency act; its defects and its effects, 

attributed to John E. Williams, 96. 
Review of our finances and of the report of Hon. S. P. Chase, by Robert J. 

Walker, 70. 



National Banking System 

Richardson, James Daniel, his compilation of the messages and papers of 

presidents, etc., 72. 
Ruggles, Clyde O., assists in preparation, 5. 



St. Louis, 13, 51, 53, 86, 170, 183, 184, 186. 

St. Louis Daily Democrat, 53. 

St. Paul, 52. 

St. Paul Daily Press, 52, 59. 

St. Petersburg, 13. 

San Francisco, Cal., 44, 89, 90, 93. 

Saratoga Springs, 65. 

Schuckers, Jacob William, his Life of Chase, 69, 75, 76, 97, 100, 103. 

Secretary of the Treasury, 8, 30, 40, 41, 42, 45, 50, 54, 55, 58, 59, 60, 67, 

74, 81, 82, 94, 95, 97, 98, 99, 100, 103, 104, 106, 113, 114, 115, 122, 123, 
129, 136, 150, 155, 156, 157, 164, 165, 172, 178, 184, 190, 191, 197. 

Seven-thirty Treasury notes, 35, 105. 

Sherman, John, speech, 14; sponsor for the bill, 73; will support the bill, 

75, 76; insists on separation from supply bill, 77; his speech referred to, 
78; the speech itself, 79, 81; wants apportionment, 85; passage of bill 
due to him, 88 ; banks promote nationality, 1 1 1. 

Sherman act, 56, 57, 62; four additional sections, 78; House passes it, 82; 
taxation clause changed, 84; stockholders liability, 85; sections for 
nationalizing state banks, 86, 88, 97; act repealed, 101, 103; reprint, 
155; currency department established, 155; seal of office, 156; rooms 
assigned, 157; United States bonds defined, 157; number of persons in 
association, 157; form of certificate, 157; payment of capital, 158; 
failure to pay, 159; issuance of certificate, 160; powers of association, 
161; shares and liability, 162; increase of capital, 162; rights of 
association, 163; deposit of bonds, 163; circulating notes, 164; appor- 
tionment, 164; engraved plates, 165; payment for plates, 165; receivable 
for public dues, 167; mutual checks on Treasurer and Comptroller, 
168; annual certificate, 168; quarterly report, 169; failure to redeem, 
171 ; forfeiture and cancellation of bonds, 171 ; public sale of bonds, 173; 
private sale of bonds, 173; closure, 174; return of bonds, 175; decline 
of bonds, 177; mutilated bills, 178; illegal emissions, 178; protest fees, 
179; stockholders' borrowing limit, 179; shares defined, 180; association 
not to purchase own stock, 180; voting powers, 181; directors, 181; 
term of office, 182; redemption fund, 183; limit of liabilities, 184; 
pledge of notes forbidden, 185; dividends only from profits, 185; 
dividend statement, 185; interest rates, 187; limit for borrowers, 
188; use of certain bills prohibited, 188; no preference to creditors, 
189; penalty for violating act, 189; examination of affairs, 190; 
embezzlement, 190; list of shareholders, 191; depositories, 191; suits 
against government officers, 192; penalty for mutilating bills, 192; coun- 



National Monetary Commission 



terfeiters, 192; intent to counterfeit, 193; jurisdiction, 194; Comptroller's 
report, 194; nationalization of state banks, 195; currency for state 
banks, 196; failure of state banks to redeem, 196; cancellation of bonds, 
197; amendments to, repeal, 197. 

Smith, Richard, letter from Mr. Chase, 100. 

Solicitor of the Treasury, 58, 150, 192. 

Spaulding, Eldridge Gerry, Member of Congress, author of History of legal- 
tender paper mone)', etc., 30; prepares a bill, 55; similar to Hooper bill, 
57, 61; would vote for the bill, 81; his History referred to, 91. 

Specie circular, issued by Jackson, 29. 

Sprague, Prof. Oliver M. W., edits Dunbar's Economic Essays, 12. 

Springfield, 111., 17. 

Statutes at Large, 28, 29. 

Stevens, Thaddeus, Member of Congress, letter from Mr. Chase, 43 ; reports 
adversely to bill, 56, 61 ; letter from Mr. Chase, 71 ; opposes bill, 87. 

Stilwell, Silas M., publishes pamphlet on Origin of banking system, 57, 58, 
59, 60, 61. 

Sturgis, S., & Sons, say demand notes are needed, 63. 

Suffolk Bank, Boston, redeems for country banks, 12. 



Taft, Alphonso, father of the President, letter to Mr. Chase, 51. 
Taylor, James W., calls attention to article in St. Paul Daily Press, 52. 
Tennessee, adopts free banking, 12. 
Thomas, William G., says Treasury notes refused, 54. 
Three-sixty -five treasury notes, 35. 
Treasury drafts, suggested for currency, 45, 64. 

Treasury notes, 29; noninterest-bearing suggested, 44; interest-bearing 
urged, 44 ; their emission in place of bank notes, 49 ; objects of curiosity, 

49-. 
Trowbridge, John T., letter from Mr. Chase, 33, 34, 99. 

U. 

Uniform currency might be based on United States stocks, 9 ; advantages of, 
J 3> 36, 38, 60, 67; Lincoln urges, 72; first among advantages, 77; the 
only check, 80; an inestimable blessing, 82; Mr. Chase works to devise, 
9 1 * 9 2 » 93> 98; importance of, 100, 101, 104, 105, 106; first in Mr. Chase's 
mind, 107; predominant motive, 109, 112. 

Uniform National Currency, A, title of a pamphlet attributed to John Jay 
Knox, 13. 

United States, Bank of the. (See Bank of the United States.) 

United States bonds. (See United States stocks.) 

United States currency, 46, 47. 

United States notes, 33, 53, 73. 

United States Statutes at Large. (See Statutes at Large.) 



National Banking System 

United States stocks, uniform currency might be based on, 9, 36, 37, 39, 
45,46,47,48,53,57, 72, 74, 80, 90, 113, 115, 121, 122, 124, 135, 155, 157, 
163, 165, 167, 172, 173, 200. 

United States Treasury notes. (See Treasury notes.) 

V. 

Van Buren, Martin, President, etc., enforces specie circular, 29. 
Vermont, adopts free banking, 12. 
Vienna, Austria, 15. 

Virginia, adopts free banking, 12; miserably engraved notes of, 14; bonds 
used by Illinois banks, 18. 

W. 

W., signature to magazine article, 9. 

Walker, Amasa, Member of Congress, sympathizes with Mr. Chase's plans. 

52; opposes bill, 74; favors bill, 90; speech, 112. 
Walker, George, says sale of bonds not leading motive, 105. 
Walker, Robert J., urges adoption of plan, 64; writes a brochure, 70; 

praise from Mr. Chase, 99; quoted, in. 
Walley, Samuel H., Member of Congress, letter to Mr. Chase, 69; disclaims 

hostility, 74. 
Warden, Robert Bruce, his Life of Chase, 65, 98. 
Washington, D. C, 45, 58, 59, 87, 127, 170. 
Ways and means, act to provide, etc., taxes national banks, 84, 85, 101; 

reprint of section seven, 199, 200, 201, 202. 
Ways and Means Committee, 55; Spaulding bill hung up, 56; submitted, 

58; Chase's letter, 71; bill submitted to, 87; majority hostile, 99. 
Western Banker, nom de plume, Hunt's Merchants' Magazine, 13, 24. 
White, Horace, his Money and Banking, 104, 108, 109. 
Williams, John E., writes tart letter, 30, 34; attacks national banks, 96. 
Winthrop, Robert C, 57. 
Wisconsin, adopts free banking, 12; "not-to-be-forgotten stumptails" of, 

14; bank failures, 16. 



213 



c m 'in 



61st Congress [ 
2d Session \ 



SENATE 



Document 582 
Part 2 



NATIONAL MONETARY COMMISSION 



Supplement 



to 



The Origin of the National 
Banking System 



BY 



ANDREW MacFARLAND DAVIS 






Washington : Government Printing Office : 1911 



61ST CONGRESS / ci7XTAO>t? J DOCUMENT 582 

2d Session ) SENATE j Part 2 



NATIONAL MONETARY COMMISSION 



Supplement 



to 



The Origin of the National 
Banking System 



BY 



ANDREW MacFARLAND DAVIS 



Washington : Government Printing Office : 1911 



c 

&$ 



APR 12 1311 



Origin of National Banking System 



Appendix D. 

THE MOORHEAD BILL. 

On the 20th of January, 1863, Mr. Moorhead of Penn- 
sylvania introduced in the House of Representatives a 
bill " To provide a national currency secured by a pledge of 
United States stock, and to provide for the circulation and 
redemption thereof.' ' Mr. Moorhead was neither a finan- 
cier nor a lawyer, hence it may be inferred that the bill was 
introduced at the suggestion of some other person, for the 
purpose of securing a foothold in the legislative contro- 
versy then in progress. Its introduction does not, how- 
ever, seem to have had the slightest influence upon the 
progress of events. The history of the bill is to be found 
in full in the entries in the House Journal and the Con- 
gressional Globe, which record the action of the House on 
that day. The bill was ordered to be printed and was 
referred to the Committee on Ways and Means. After 
which it was not heard of. No copy of the bill is to be 
found in the House document room, but it chances that 
one has been preserved in the collection in the document 
room of the Senate. From that source we are able to pro- 
cure a copy of House bill No. 693, Thirty-seventh Congress, 
third session, which, even though it was stillborn, is en- 
titled to recognition in an attempt to place on record the 
story of the development of the present national banking 
act. As it has not heretofore been reprinted it is now 
offered as an appendix to Senate Document No. 582, 
Sixty-first Congress, second session. 

84013 °— S. Doc. 582, 61-2, pt 2 2 215 



National Monetary Commission 

The reference of the Moorhead bill to the committee 
proved to be fatal even to the discussion of its merits, for 
when the bill known as the Sherman Act was sent down 
to the House after its passage in the Senate, its considera- 
tion by the House was secured without committee refer- 
ence, with the result that it was put through the several 
parliamentary stages requisite as a preliminary to its 
passage and finally passed without suffering delay from 
reference, all of which took place while the Moorhead bill 
was slumbering in the hands of the committee. 

The Hooper bill was already before the House and a 
comparison of that bill with the Moorhead bill will show 
that the provisions of the first four sections are the same. 
The fifth section, however, in the Moorhead bill, is intru- 
sive and discloses the probable purpose of the introduction 
of the bill. It provides that any bank having a capital of 
not less than $100,000, chartered in any State or Territory 
or in the District of Columbia may deposit United States 
stock with the United States Treasurer, and receive the 
national currency authorized by the act, to the extent of 
80 per cent of the market value of the stock deposited. 
Provision is made in this section for the reception by the 
banks of the currency to be furnished by the Government 
and for the forfeiture of the pledged securities of any bank 
receiving the currency, which should fail to redeem the 
same on presentation. 

The provisions of the Hooper bill relative to the recep- 
tion by associations of the government currency; the 
method of establishing a failure to redeem, and the man- 
ner in which the forfeiture should be imposed are neces- 
sarily voluminous. The person who drafted section 5 of 

216 



Origin of National Banking System 

the Moorhead bill, in order to save unnecessary repetition, 
covered the ground of incorporating these various sections 
into section 5 by references to the other sections by num- 
ber, describing them as sections "of this act." An exam- 
ination of the sections in the Moorhead bill bearing the 
designated numbers shows that they do not treat of the 
subjects referred to. If we test the Hooper bill to see if the 
references by section might perhaps fit in with that bill, we 
meet with the same result; but when we make the same 
test with the Sherman Act, we find that the references 
are appropriate. It would be natural to conclude that 
whoever drafted this section had the Sherman Act before 
him and made his references to the numbered sections in 
that act which deal with the respective subjects under 
consideration. It would not seem, however, as if such 
could have been the case. The Moorhead bill was intro- 
duced in the House on the 20th and the Sherman Act in 
the Senate on the 26th of January. Had the case been 
reversed and numerical references in the Sherman Act been 
found to correspond with the sections in the Moorhead 
bill, the conclusion would have been irresistible that use 
had been made of that bill by the person who drafted the 
Sherman Act. It is evident that whoever performed that 
service discovered the fact that there was likely to be 
trouble in these numerical cross references, and skillfully 
avoided them throughout the act. On the other hand, an 
examination of the Hooper bill shows that the section ref- 
erences in that bill are all wrong. This also is the case 
with the Moorhead bill with a single exception. 

The sixth and seventh sections of the Moorhead bill 
correspond practically with the fifth and sixth in the 



217 



National Monetary Commission 

Hooper bill, but the eighth section of the former is made 
up of a consolidation of the ninth and tenth sections of 
the latter, the seventh and eighth not being reproduced. 
Through omissions and changes the consolidated section 
differs considerably from the originals, it being made a 
prerequisite for an association before it can receive its 
certificate to deposit with the Treasurer 50 per cent of 
the amount of its capital stock in United States 6 per cent 
bonds. 

Sections 9, 10, 11, and 12 of the Moorhead bill corre- 
spond practically with sections 11, 12, 13, and 14 of the 
Hooper bill. No increase of stock, however, was to be 
valid under the Moorhead bill until the whole amount of 
this increase should have been deposited with the Treas- 
urer of the United States in 6 per cent United States stocks. 

The fifteenth section of the Hooper bill is dropped en- 
tirely from the Moorhead bill, but in place of it the eighth 
section of that bill called for a notification to the Comp- 
troller of Currency that at least 50 per cent of the whole 
amount of the proposed capital stock of the association 
which was seeking to organize under the act had been 
deposited with the Treasurer of the United States " in and 
of United States stocks, or their equivalent in United States 
stocks," for the purpose and with the views of obtaining 
therefor circulating notes. 

Sections 13 to 31, inclusive, of the Moorhead bill cor- 
respond closely with sections 16 to 34 of the Hooper bill, 
with the exception that section 23 is greatly curtailed. 

Sections 35 to 55 of the Hooper bill, which relate in a 
general way to the management of the associations, pre- 
scribe what they may do, impose certain restraints upon 



:iS 



Origin of National Banking System 

their actions, and define the responsibilities and liabilities 
of their officers, are omitted in the Moorhead bill, with 
the exception that section 54 of the Hooper bill, which 
authorizes the Secretary to employ associations as deposi- 
taries, is to be found in section 32 of the Moorhead bill in 
a modified form. 

Sections 33 to 37, inclusive, of the Moorhead bill corre- 
spond with sections 56 to 60 of the Hooper bill. Section 
61 of the Hooper bill is omitted, while section 38 of the 
Moorhead bill is a mere reservation of the right to amend 
at any time. 



219 



National Monetary Commission 



37TH Congress,] 

' H. R. 693. 

3rd Session. J 

In the House of Representatives. 

January 20, 1863. 

Mr. MoorhEad, on leave, introduced the following bill: 

To provide a national currency, secured by a pledge of United States stock, 
and to provide for the circulation and redemption thereof. 

Be it enacted by the Senate and House of Representatives 
of the United States of America in Congress assembled, 
That there shall be established in the Treasury Depart- 
ment a separate bureau, which shall be charged with the 
execution of this act and all laws that may be passed 
by Congress respecting the issue and regulation of a 
national currency secured by a pledge of United States 
stock. The chief officer of said bureau shall be denomi- 
nated the Comptroller of the Currency, and shall be 
under the general direction of the Secretary of the Treas- 
ury. He shall be appointed by the President, by and 
with the advice and consent of the Senate, and shall 
hold his office for the term of five years unless sooner 
removed by the President, by and with the advice and 
consent of the Senate; he shall receive an annual salary 
of five thousand dollars; he shall appoint a competent 
deputy, whose salary shall be two thousand five hun- 
dred dollars, and who shall possess the power and per- 
form the duties attached by law to the office of said 
Comptroller during a vacancy in such office and during 
his absence or inability; he shall employ, from time to 



Origin of National Banking System 

time, the necessary clerks to discharge such duties as he 
shall assign to them, whose salaries shall not exceed 
sixteen hundred dollars each. Within fifteen days from 
the time of notice of his appointment the said Comptroller 
shall take and subscribe the oath of office prescribed 
by the Constitution and laws of the United States; and 
he shall give to the United States a bond in the penalty 
of one hundred thousand dollars, with two responsible 
freeholders as sureties, to be approved by the Secretary 
of the Treasury, conditioned for the faithful performance 
of the duties of his office; and he shall not, either directly 
or indirectly, be interested in any association issuing 
national currency under the provisions of this act. The 
Deputy Comptroller so appointed shall also take the 
oath of office prescribed by the Constitution and laws 
of the United States, and shall give a bond in the penalty 
of fifty thousand dollars. 

Sec. 2. And be it further enacted, That the said Comp- 
troller of the Currency, with the approval of the Secretary 
of the Treasury, shall devise a seal with suitable inscrip- 
tions for his office, a description of which, with a certi- 
ficate of approval by the Secretary of the Treasury, shall 
be filed in the office of the Secretary of State with an 
impression thereof, which shall thereupon be and become 
the seal of office of the Comptroller of the Currency, and 
the same may be renewed whenever necessary. Every 
certificate, assignment, and conveyance executed by 
the said Comptroller, in pursuance of any authority 
conferred on him by law, and sealed with his said seal of 
office, shall be received in evidence in all places and 
courts whatsoever; and all copies of papers in the office 



National Monetary Commission 

of the said Comptroller, certified by him and authenti- 
cated by the said seal, shall in all cases be evidence 
equally and in like manner as the original. An impres- 
sion of such seal directly on the paper shall be as valid 
as if made on wax or wafer. 

SEC. 3. And be it further enacted, That there shall be 
assigned to said Comptroller of the Currency by the 
Secretary of the Treasury suitable rooms in the Treasury 
building for conducting the business of the Currency 
Bureau, in which shall be safe and secure fire-proof 
vaults, in which it shall be the duty of said Comptroller 
to deposit and safely keep all the books, papers, plates, 
and other valuable things belonging to his department; 
and the said Comptroller shall from time to time furnish 
the necessary furniture, stationery, fuel, lights, and 
other proper conveniences for the transaction of the said 
business, the expense of which shall be paid out of any 
money in the treasury not otherwise appropriated. 

SEC. 4. And be it further enacted, That the term 
" United States stock," as used in this act, shall be con- 
strued to mean all coupon and registered bonds now 
issued, or that may hereafter be issued, on the faith of 
the United States by the Secretary of the Treasury in 
pursuance of law. 

Sec. 5. And be it further enacted, That any chartered 
bank or banking association in good credit, whose capital 
is not less than one hundred thousand dollars, organized 
under the law of any State or Territory, or in the District 
of Columbia, wishing to avail itself of the advantages of 
the national currency authorized to be issued by this act, 
shall present to the Comptroller of the Currency an author- 



Origin of National Banking System 

ized application therefor, verified by its seal and the 
signature of its president and cashier, duly acknowledged 
before a judge of some court of record or a notary public, 
the acknowledgment thereof to be certified under the 
seal of such court or notary ; and the said application shall 
state the name of the said bank or banking association, 
the place where its office of discount, deposit, and issue is 
located, designating the State, city, town, or village, the 
amount of the capital stock, the number of shares into 
which the same is divided, the par value of each share, the 
time when its charter will expire; and a declaration that 
the said certificate is made to enable such bank or banking 
association to avail itself of the advantages of this act, so 
far as to receive from the Comptroller of the Currency such 
an amount of the national currency authorized to be 
issued by this act, in the denominations and according to 
the forms prescribed by the eighteenth section of this act, 
as shall be equal in amount to eighty per centum of the 
market price not over the par value of the United States 
stock, bearing interest, which pursuant to the provisions 
of this act, the said bank, making the said declaration, 
may preliminary to its receiving such notes, transfer and 
deliver to, and deposit with, the Treasurer of the United 
States; which United States stock so transferred as secur- 
ity for notes issued as aforesaid, shall be held by the Treas- 
urer of the United States, pursuant to the provisions of 
the twenty-first section of this act. And further, that if 
any such bank or banking association shall, at any time, 
fail to redeem, in lawful money of the United States, any 
of the circulating notes delivered to it as aforesaid, when 
payment thereof shall be lawfully demanded, during the 



84013 °— S. Doc. 582, pt 2- 



223 



National Monetary Commission 

usual hours of business, at the office of such bank or 
banking. association, (the fact of such refusal to pay such 
notes to be ascertained pursuant to the twenty-fifth 
section of this act,) the stock of the United States, so 
pledged, shall be forfeited to, and disposed of, by the 
United States, according to the provisions of the twenty- 
sixth section of this act; and further, that the said char- 
tered bank or banking association shall be entitled to no 
advantages, or be subject to any provisions of this act 
other than such as are provided for in this section and the 
other sections of this act referred to as aforesaid. 

SEC. 6. And be it further enacted, That associations for 
carrying on the business of banking many be formed by 
any number of persons, not less in any case than five. 

SEC. 7. And be it further enacted, That persons uniting 
to form such an association shall, under their hands and 
seals, make a certificate which shall specify — 

First. The name assumed by such association. 

Second. The place where the operations of discount and 
deposit of such association are to be carried on; designat- 
ing the State, Territory, or District, and also the particular 
city, town, or village. 

Third. The amount of the capital stock of such asso- 
ciation, and the number of shares into which the same shall 
be divided ; which capital stock shall not be less than fifty 
thousand dollars. 

Fourth. The names and places of residence of the share- 
holders, and the number of shares held by each of them. 

Fifth. The time when such association shall commence, 
and when the same shall terminate. 



224 



Origin of National Banking System 

Sixth. A declaration that said certificate is made to 
enable such persons to avail themselves of the advantages 
of this act. 

Said certificate shall be acknowledged before a judge of 
some court of record or a notary public, and the acknowl- 
edgement thereof certified under the seal of such court or 
notary, and shall be transmitted, together with a copy of 
the articles of association which shall have been adopted, 
to the Comptroller of the Currency, who shall record and 
carefully preserve the same in his office. Copies of such 
certificate, duly certified by the said Comptroller, and 
authenticated by his seal of office, shall be legal and suffi- 
cient evidence in all courts and places within the United 
States, or the jurisdiction of the government thereof, of 
the existence of such association, and of every other 
matter or thing w T hich could be proved by the production 
of the original certificate. 

SEC. 8. And be it further enacted, That whenever a cer- 
tificate shall have been transmitted to the Comptroller of 
the Currency, as provided in the seventh section of this 
act, and the association transmitting the same shall notify 
said Comptroller that at least fifty per centum of the whole 
amount of the proposed capital stock of such association 
has been deposited with the Treasurer of the United 
States, in and of six per centum United States stocks, or 
their equivalent in United States stocks, for the purpose 
and with the views of obtaining therefor circulating notes, 
under and according to the provisions of this act ; if, upon 
a careful examination of the facts so reported, and of any 
other facts which may come to the knowledge of the said 



225 



National Monetary Commission 

Comptroller, whether by means of a special commission 
appointed by him for the purpose of inquiring into the 
condition of such association, or otherwise, it shall appear 
that such association is lawfully entitled to commence the 
business of banking, the said Comptroller shall give to such 
association a certificate under his hand and official seal, 
showing that such association has complied with all the 
provisions of this act required to be complied with before 
being entitled to commence the business of banking under 
it, and that such association is authorized to commence 
said business accordingly ; and it shall be the duty of such 
association to cause said certificate to be published in some 
daily newspaper, published in the State where such asso- 
ciation is located, for at least sixty days next after the 
issuing thereof. 

SEC. 9. And be it further enacted, That every association 
formed pursuant to the provisions of this act may make and 
use a common seal, and shall have succession by the name 
designated in its articles of association and for the period 
limited therein; by such name may make contracts, sue 
and be sued, complain and defend in any court of law or 
equity as fully as natural persons, and may make by-laws, 
not inconsistent with law or the provisions of this act, for 
the election of directors, the management of its property, 
the regulation of its affairs, and for the transfer of its 
stock; and shall have power to carry on the business of 
banking by obtaining and issuing circulating notes in 
accordance with the provisions of this act ; by discounting 
bills, notes, and other evidences of debt; by receiving 
deposits; by buying and selling gold and silver bullion, 
foreign coins, and bills of exchange; by loaning money on 

226 



Origin of National Banking System 

real and personal security in the manner specified in their 
articles of association for the purposes authorized by this 
act, and by exercising such incidental powers as shall 
be necessary to carry on such business ; to choose one 
of their number as president of such association, and to 
appoint a cashier and such other officers and agents as 
their business may require; and to remove such president, 
cashier, officers, and agents at pleasure, and appoint 
others in their place; and all associations issuing notes to 
circulate as money under the provisions of this act shall 
be banks of discount and deposit as well as of circulation, 
and their usual business shall be transacted in banking 
offices located at the places specified respectively in their 
certificates of associations, and not elsewhere. 

SEC. io. And be it further enacted, That the shares of 
associations formed under this act shall be deemed personal 
property, and shall be transferable on the books of the 
association in such manner as may be prescribed in the 
articles of association ; and every person becoming a share- 
holder by such transfer shall, in proportion to his shares, 
succeed to all the rights and liabilities of the prior holder 
of such shares ; and no change shall be made in the articles 
of association by which the rights, remedies, or security of 
the existing creditors of the association shall be impaired. 

SEC. ii. And be it further enacted, That it shall be lawful 
for any association formed under this act, by its articles 
of association, to provide for an increase of its capital from 
time to time as may be deemed expedient; but no such 
increase shall be valid until the whole amount of such 
increase shall have been deposited with the Treasurer of 
the United States in six per centum United States stocks, 



227 



National Monetary C omrnis s to 



n 



or their equivalent in United States stocks, for the pur- 
pose and with the views of obtaining circulating notes 
therefor, under and according to the provisions of this act, 
and notice of such increase and deposit shall have been 
duly transmitted to the Comptroller of the Currency and 
verified and certified by him. 

SEC. 12. And be it further enacted, That it shall be lawful 
for any such association to purchase, hold, and convey 
real estate as follows : 

First. Such as shall be necessary for its immediate 
accommodation in the transaction of its business. 

Second. Such as shall be mortgaged to it in good faith 
by way of security for loans made by such association, or 
for moneys due thereto. 

Third. Such as shall be conveyed to it in satisfaction of 
debts previously contracted in the course of its dealings. 

Fourth. Such as it shall purchase at sales under judg- 
ments, decrees, or mortgages held by such association. 

Such association shall not purchase or hold real estate 
in any other case or for any other purpose than as specified 
in this section. 

Sec. 13. And be it further enacted, That upon the making 
of any such transfer and delivery of United States stock 
as heretofore provided, and otherwise complying with the 
other preliminary requirements of this act, the association 
making the same shall be entitled to receive from the 
Comptroller of the Currency circulating notes of different 
denominations, in blank, registered and countersigned as 
hereinafter provided, equal in amount to the current 
market value of the United States stock so transferred and 
delivered, but not exceeding the par value thereof, if 



228 



Origin of National Banking System 

bearing interest at the rate of six per centum, and the 
equivalent of stock bearing interest at the rate of six per 
centum if in stock bearing a less rate of interest; and at 
no time shall the total amount of such notes, issued to any 
such association exceed the amount at such time actually 
paid in of its capital stock. 

SBC. 14. And be it further enacted, That, in order to fur- 
nish suitable notes for circulation, the Comptroller of the 
Currency is hereby authorized and required, under the 
direction of the Secretary of the Treasury, to cause plates 
to be engraved, in the best manner to guard against coun- 
terfeiting and fraudulent alterations, and to be printed 
therefrom and numbered, such quantity of circulating 
notes, in blank, of the denominations of five dollars, ten 
dollars, twenty dollars, fifty dollars, one hundred dollars, 
five hundred dollars, and one thousand dollars, as may be 
required to supply, under this act, the banks and associa- 
tions entitled to receive the same; which notes shall ex- 
press upon their face that they are secured by United 
States stock, deposited with the Treasurer of the United 
States and issued under the provisions of this act, which 
statement shall be attested by the written or engraved 
signatures of the Treasurer and Register, and by the im- 
print of the seal of the treasury; and shall also bear upon 
their face the usual promise of the bank or association 
receiving the same, to pay on demand attested by the 
signatures of the president and cashier; and the said notes 
shall bear such devices and such other statements, and 
shall be in such form, as the Secretary of the Treasury 
shall, by regulation, direct. 



229 



National Monetary Commission 

SEC. 15. And be it further enacted, That the plates and 
special dies to be procured by the Comptroller of the 
Currency for the printing of such circulating notes shall 
remain under his control and direction, and the expenses 
necessarily incurred by him, in executing the provisions 
of this act respecting the procuring of such notes, shall be 
audited and paid as contingent expenses of the Treasury 
Department; and for the purpose of reimbursing the same, 
and all other expenses incurred under this act, and in lieu 
of all taxes upon the circulation authorized by this act, or 
upon the bonds deposited for security of the same, the 
Treasurer of the United States is hereby authorized to 
reserve and retain one-fourth of one per centum on the 
amount of said bonds so deposited, at each semi-annual 
payment of interest thereon ; and all sums so reserved and 
retained shall be paid into the treasury under the direction 
of the Secretary, and every bank, banking association, or 
corporation issuing notes calculated or intended to circu- 
late as money, otherwise than as in this act provided, 
shall, within six months after the passage of this act, and 
regularly once in every succeeding six months, make and 
deliver to the Comptroller of the Currency a true and 
accurate return of the amount of notes issued by it, 
whether in circulation, in its vaults, or on deposit else- 
where, specifying the amount of the several denominations ; 
and shall pay to the Comptroller of the Currency, semi- 
annually and at the time of making each return, in lawful 
money of the United States, one per centum upon the gross 
amount of notes issued, according to such return, during 
the first year after the passage of this act, and two per 
centum semi-annually thereafter thereon; and in default 



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Origin of National Banking System 

of any such return, the bank, banking association, or cor- 
poration so failing to make return shall pay to the United 
States a penalty of three per centum upon its entire capital 
stock, to be recovered, for the use of the United States, in 
any court of competent jurisdiction. 

SEC. i 6. And be it further enacted, That after any such 
association shall have caused such notes to be filled up and 
signed by the president or vice-president and cashier 
thereof, in such manner as to make them obligatory 
promissory notes, payable on demand, at its place of busi- 
ness, such association is hereby authorized to issue and 
circulate the same as money; and the same shall be re- 
ceived at par in all parts of the United States in payment 
of taxes, excises, public lands and all other dues to the 
United States, except for duties on imports, and also for all 
salaries and other debts and demands owing by the United 
States to individuals, corporations, and associations 
within the United States; and no such association shall 
issue post notes or any other notes to circulate as money 
than such as are authorized by the foregoing provisions 
of this act. 

Sec. 17. And be it further enacted, That all transfers 
of United States stock which shall be made by any bank or 
banking association as security for circulating notes under 
the provisions of this act shall be made to the Treasurer 
of the United States, with a memorandum written or 
printed on the certificate of such stock, and signed by the 
cashier or some other officer of the association making the 
deposit, stating that it is held in trust for the association 
on whose behalf such transfer is made, and as security for 
the redemption and payment of the circulating notes deliv- 



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National Monetary Commission 

ered to such bank or association; and no transfer of any 
such stock by the Treasurer shall be deemed valid or of 
binding force and effect, unless sanctioned by the order 
or request of the Comptroller of the Currency upon said 
Treasurer. It shall be the duty of the Comptroller of the 
Currency to keep in his office a book in which shall be 
entered the name of every bank or banking association, 
from whose account such transfer of stock is made by the 
said Treasurer, and the name of the party to whom such 
transfer is made, unless such transfer is made in blank, 
in which case the fact shall be stated in said book, and in 
either case the par value of the stock so transferred shall 
be entered therein; and it shall be the duty of the said 
Comptroller, immediately upon countersigning and enter- 
ing the same, to advise by mail the bank or association 
from whose account such transfer was made, the kind of 
stock, and the amount thereof so transferred. 

SEC. i 8. And be it further enacted, That it shall be the 
duty of the Comptroller of the Currency to countersign 
and enter in the book, in the manner aforesaid, every trans- 
fer or assignment of any stock held by the said Treasurer 
presented for his signature; and the said Comptroller shall 
have at all times during office hours access to the books 
of the Treasurer, for the purpose of ascertaining the cor- 
rectness of the transfer or assignment presented to him 
to countersign; and the Treasurer shall have the like 
access to the book above mentioned, kept by the said 
Comptroller, during office hours to ascertain the correct- 
ness of the entries in the same. 

Sec. 19. And be it further enacted, That it shall be the 
duty of either the president or cashier of every bank and 



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Origin of National Banking System 

banking association having stocks deposited in the office 
of the Treasurer of the United States, once or more in each 
fiscal year, and at such time or times during the ordinary- 
business hours as said officer or officers may select, to 
examine and compare the stock so pledged with the books 
of said department, and if found correct, to execute to the 
said Treasurer a certificate setting forth the different 
kinds and the amounts thereof, and that the same are in 
the possession and custody of the said Treasurer at the 
date of such certificate. Such examination may be made 
by an agent of such bank or association, duly appointed 
in writing for that purpose, whose certificate before men- 
tioned shall be of like force and validity as if executed by 
such president or cashier. 

SEC. 20. And be it further enacted, That every associa- 
tion issuing circulating notes under the provisions of this 
act shall make a quarterly report to the Comptroller of the 
Currency, commencing in August next, and to be con- 
tinued in November, February, May and August in each 
year thereafter, which report shall be verified by the 
president and cashier, and each of such reports shall 
contain a correct statement of the amount of the capital 
stock, of the average amount of the loans and discounts, 
of the specie and specie funds, of the legal tender notes 
of the United States, of the deposits, and of the circulation 
outstanding during the three months immediately pre- 
ceding of each of said several and respective banks and 
banking associations, and all wilful false swearing in 
respect to such report shall be perjury, and subject to the 
punishment prescribed by law for such offence. 



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National M on et ar y Commission 

Sec. 21. And be it further enacted, That if any such asso- 
ciation shall at any time fail to redeem, in the lawful 
money of the United States, any of its circulating notes, 
when payment thereof shall be lawfully demanded, during 
the usual hours of business, at the office of such associa- 
tion, the holder may cause the same to be protested in one 
package, by a notary public, unless the president, cashier, 
or teller of the association shall offer to waive demand and 
notice of the protest, and shall, in pursuance of such offer, 
make, sign, and deliver to the party making such demand 
an admission in writing, stating the time of the demand, 
the amount demanded, and the fact of the non-payment 
thereof; and such notary public, on making such protest, 
or upon receiving such admission, shall forthwith forward 
such admission or notice of protest to the Comptroller of 
the Currency; and after such default it shall not be lawful 
for the association suffering the same to pay out any of 
its notes, discount any notes or bills, or otherwise prose- 
cute the business of banking, except to receive and safely 
keep money belonging to it, and to deliver special deposits: 
Provided, however, That if satisfactory proof be produced 
to such notary public that the payment of any such notes 
is restrained by order of any court of competent jurisdic- 
tion, such notary public shall not protest the same; and 
when the holder of such notes shall cause more than one 
note or package to be protested on the same day, he shall 
not receive pay for more than one protest. 

SEC. 22. And be it further enacted, That on receiving 
notice that any such association has failed to redeem any 
of its circulating notes, as specified in the next preceding 
section, the Comptroller of the Currency, with the con- 



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Origin of National Banking System 

currence of the Secretary of the Treasury, shall appoint a 
special agent, (of whose appointment immediate notice 
shall be given to such association,) who shall immediately 
proceed to ascertain whether such association has refused 
to pay its circulating notes, in the lawful money of the 
United States, when demanded as aforesaid, and report 
to the said Comptroller of the Currency the facts so ascer- 
tained; and if, from the reports so made, the said Comp- 
troller shall be satisfied that such association has refused 
to pay its circulating notes as aforesaid, and that it has 
been in default ten days, he shall, within thirty days after 
he shall have received notice of such failure, declare the 
United States stock and securities pledged by such asso- 
ciation forfeited to the United States, and the same shall 
thereupon be forfeited accordingly; and thereupon said 
Comptroller shall immediately give notice in such manner 
as the Secretary of the Treasury shall, by general rules or 
otherwise, direct, to the holders of the circulating notes of 
such association to present them for payment at the treas- 
ury of the United States; and the same shall be paid as 
presented, whereupon said Comptroller may, in his dis- 
cretion, cancel an equal amount of the stock pledged by 
such association ; and it shall be lawful for the Secretary of 
the Treasury, from time to time, to make such regulations 
respecting the disposition to be made of such circulating 
notes after presentation thereof for payment as aforesaid, 
and respecting the perpetuation of the evidence of the 
payment thereof, as may seem to him proper ; but all such 
notes, on being paid, shall be cancelled; and for any de- 
ficiency in the proceeds of the stocks and securities pledged 
by such association, when disposed of as hereinafter speci- 



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National Monetary Commission 

fled, to reimburse to the United States the amount so 
expended in paying the circulating notes of such associa- 
tion, the United States shall have a first and paramount 
lien upon all the assets of such association, and such 
deficiency shall be made good out of such assets in pref- 
erence to any and all other claims whatsoever, except the 
necessary costs and expenses of administering the same. 

Sec. 23. And be it further enacted, That whenever said 
Comptroller shall become satisfied, as in the last preceding 
section specified, that any such association has refused to 
pay its circulating notes as therein mentioned he may, 
instead of cancelling the United States stock and securities 
pledged by such association, as provided in the next pre- 
ceding section, cause so much of them as may be necessary 
to redeem the outstanding circulating notes of such asso- 
ciation to be sold at public auction in the city of New York, 
after giving notice of such sale to such association, and also 
advertising the time and place of sale, with a pertinent 
description of the stock to be offered for sale, in two or more 
newspapers published in the city of New York, for not less 
than ten days next preceding the day of sale. 

SEC. 24. And be it further enacted, That the Comptroller 
of the Currency, may if he shall be of opinion that the 
interests of the United States will be best promoted there- 
by, sell at private sale any of the stock so transferred to 
him by such association to any other association, or to any 
individual person or firms, and receive therefor either 
money or the circulating notes of such failing association : 
Provided, That no such stock shall be sold by private sale 
for less than the par value thereof at the time of sale, nor 
shall any such stock be sold on credit: And provided fur- 

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Origin of National Banking System 

ther, That no sales of any such stock, either public or pri- 
vate, shall be complete until the transfer thereof shall have 
been made with the formalities prescribed in section 
twenty-one of this act. 

SEC. 25. And be it further enacted, That on becoming sat- 
isfied, as specified in section twenty-six of this act, that any 
such association has refused to pay its circulating notes as 
therein mentioned, and has been in default for ten days, 
the Comptroller of the Currency may forthwith appoint a 
receiver, and require of him such bond and security as he 
shall deem proper, who shall proceed, under the direction 
of said Comptroller, to take possession of the books, records, 
and assets of every description of such association, collect 
all debts, dues, and claims belonging to such association, 
and, upon the order of a court of record of competent juris- 
diction, may sell or compound all bad or doubtful debts, 
and, on a like order, sell all the real and personal property 
of such association, on such terms as the court shall direct, 
and pay over all moneys so made to the Treasurer of the 
United States, and also make report to the Comptroller 
of the Currency of all his acts and proceedings. Such 
Comptroller shall cause notice to be given, by advertise- 
ment in one or more newspapers published in the city in 
which such association is located, if the same be in a city, 
and if not, then in one or more newspapers published in 
the county where the same is located for three consecu- 
tive months, calling on all persons who may have claims 
against such association to present the same, and to make 
legal proof thereof; and after the end of one year from the 
first publication of such notice, the said Comptroller, after 
full provision shall have been first made for refunding to 



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National Monetary Commission 

the United States any such deficiency as is mentioned in 
the twenty-sixth section of this act, shall make a ratable 
dividend of the moneys so paid over to him by such re- 
ceiver on all such claims as may have been so proved or 
adjudicated in a court of competent jurisdiction, and from 
time to time, as the proceeds of the assets of such associa- 
tion shall be paid over to him, he shall make further divi- 
dends, as aforesaid, on all claims previously proved or 
adjudicated; and the remainder of such proceeds, if any- 
thing, shall be paid over to the shareholders of such asso- 
ciation, or their legal representatives, in proportion to the 
stock by them respectively held: Provided, however, That 
if any such association, against which proceedings have 
been so instituted on account of any alleged refusal to 
redeem its circulating notes as aforesaid, shall deny having 
failed to do so, such association may, at any time within 
ten days after such association shall have been notified of 
the appointment of an agent, as provided in the twenty- 
sixth section of this act, apply to the circuit court of the 
United States, or other court of competent jurisdiction, 
to enjoin further proceeding in the premises; and such 
court, after citing the Comptroller of the Currency to show 
cause why further proceedings should not be enjoined, and 
after the decision of the court or finding of a jury that such 
association has not refused to redeem its circulating notes, 
when legally presented, in the lawful money of the United 
States, shall make an order enjoining the Comptroller, and 
any receiver acting under his direction, from all further 
proceedings on account of such alleged refusal. 

Sec. 26. And be it further enacted, That the stock trans- 
ferred to the Treasurer of the United States, as hereinbe- 



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Origin of National Banking System 

fore provided, by any bank or association for the security 
of its circulating notes, shall be held exclusively for that 
purpose, until such notes shall be redeemed, except as 
provided in this act; and if any officer of the United States 
shall and do allow or permit any of the said stocks so 
deposited or transferred as hereinbefore mentioned and 
provided, or contemplated to be so done by virtue of this 
act, to be taken, abstracted, or otherwise used, than as 
contemplated and provided by this act, every such officer 
so offending shall be deemed and held to be guilty of a 
high misdemeanor, and on conviction thereof in any court 
of the United States, shall be sentenced to be imprisoned 
and kept at hard labor for a period of not less than six 
years, nor more than twenty years, and to be fined in a 
sum not less than ten thousand dollars, nor more than 
one hundred thousand dollars; but the Comptroller of 
the Currency shall give to any banking association 
powers of attorney to receive and appropriate to its own 
use the interest on the stock which shall have been so 
transferred to him by it; but such powers shall become 
inoperative whenever such bank or association shall fail 
to redeem its circulating notes as aforesaid; and said 
comptroller may return any of said stock to the bank or 
association which transferred the same, upon the surren- 
der to him and the cancellation of a proportionate amount 
of such circulating notes: Provided, The current market 
value of the remaining stock which shall have been trans- 
ferred by the bank or association offering to surrender 
such circulating notes shall be equal to the amount of 
all the circulating notes retained by such bank or asso- 
ciation: And provided, further, That there shall have 



239 



National Monetary Commission 

been no failure by such bank or association to redeem 
its circulating notes, and that there shall have been no 
other violation by such association of any of the pro- 
visions of this act for the security of the creditors of such 
association; nor shall said Comptroller be required to sur- 
render such stock in fractional sums of less than one thou- 
sand dollars; and if, at anytime after said stock shall be 
deposited with the Treasurer of the United States, as 
aforesaid, the market or cash value shall be reduced, the 
Comptroller of the Treasury is hereby authorized to 
demand and receive the amount of such depreciation in 
other United States stock at cash value, or in money, from 
the association receiving said bills, to be deposited with 
the Treasurer of the United States as long as such depre- 
ciation continues. 

SEC. 27. And be it further enacted, That whenever the 
price of any of the bonds pledged as aforesaid for the 
redemption of the circulating notes of any such bank or 
association shall be at the stock exchange in the city of 
New York, for four consecutive weeks, at a rate less than 
that at which they shall have been estimated when so 
pledged, and such depreciation shall not have been made 
good by a deposit of other stocks or money, it shall be 
the duty of the bank comptroller to notify the Treasurer 
of the United States of such fact, and the payment of in- 
terest upon such depreciated bonds shall be suspended, and 
such interest shall be retained by said Treasurer until the 
same, when added to the current market value of the 
bonds so pledged, to be ascertained as before provided, 
shall be equal to the amount for which such bonds were 
pledged : Provided, That it shall be the duty of the bank 



240 



Origin of National Banking System 

comptroller, at the expiration of every period of three 
months, to cause the whole of the sums so retained, and 
then remaining in the treasury of the United States, to be 
invested in United States stocks, in the name of the bank 
comptroller, in trust for the respective associations by 
which the stocks on which such interest shall have ac- 
crued shall have been pledged ; and whenever the price of 
such depreciated stock at the stock exchange in New York 
shall rise to the price at which they were pledged, and so 
remain for four consecutive weeks, such investment shall 
be assigned to such association, and all accruing interest 
on such pledged stock shall thereafter be paid to such 
association on demand thereof. 

SEC 28. And be it further enacted, That whenever any 
such bank or association, being desirous of relinquishing 
its banking business, shall have paid at least ninety per 
centum of its circulating notes, and shall have delivered 
the same to the Comptroller of the Currency to be can- 
celled, and shall have provided means and given security 
to the satisfaction of the said Comptroller, for the redemp- 
tion of its outstanding notes of circulation at the place 
where such bank or association is located, and shall have 
given notice thereof by advertisement for six consecutive 
months in two newspapers of general circulation, pub- 
lished, one at the capital of the State in which such asso- 
ciation shall be located, and one in the city, town, village, 
or county in which the same is located, if there be one 
published therein, it shall be lawful for the said Comp- 
troller to authorize and for the Treasurer of the United 
States to re-transfer and deliver to such bank or association 
all the stock and securities pledged by it, and thereupon 



241 



National Monetary Commission 

all the corporate powers of such association, except such 
as shall be necessary to close up its affairs, shall cease. 

SEC. 29. And be it further enacted, That it shall be the 
duty of the Comptroller of the Currency to receive worn- 
out or mutilated circulating notes issued by any such bank 
or association, and to deliver in place thereof to such bank 
or association other blank circulating notes to an equal 
amount; and such wornout or mutilated notes, after a 
memorandum shall have been entered in the proper books, 
in accordance with such regulations as may be established 
by the said Comptroller, as well as all circulating notes 
which shall have been paid or surrendered to be cancelled, 
shall be burned to ashes by the said Comptroller of the 
Currency, in the presence of the Treasurer of the United 
States; and in case such notes shall have been delivered 
to said Comptroller by an officer or agent of said bank or 
association, then in the presence, also, of such officer or 
agent; and a certificate of such burning, signed by said 
Comptroller and Treasurer, shall be made in the books of 
said Comptroller, and a duplicate thereof given to such 
officer or agent. 

Sec. 30. And be it further enacted, That it shall be un- 
lawful for any officer acting under the provisions of this 
act to countersign or deliver to any such bank or associa- 
tion, or to any other company or person, any circulating 
notes contemplated by this act, except as hereinbefore pro- 
vided, and in accordance with the true intent and mean- 
ing of this act; and any officer who shall violate the provi- 
sions of this section shall be deemed guilty of a high mis- 
demeanor, and on conviction thereof in any court of the 
United States, shall be sentenced to be imprisoned and 



242 



Origin of National Banking System 

kept at hard labor for a period not less than six years, nor 
more than twenty years, and to be fined in a sum not less 
than ten thousand nor more than one hundred thousand 
dollars. 

SEC. 31. And be it further enacted, That all fees for pro- 
testing the notes issued by any such bank or association 
shall be paid by the person procuring the protest to be 
made, and such bank or association shall be liable therefor; 
but no part of the stock pledged by such bank or associa- 
tion, as aforesaid, shall be applied to the payment of such 
fees; and all expenses of any preliminary or other exami- 
nations into the condition of any association shall be paid 
by such association; and all expenses of any receivership 
shall be paid out of the assets of such association before 
distribution of the proceeds thereof. 

SEC. 32. And be it further enacted, That the Secretary of 
the Treasury is hereby authorized, whenever, in his judg- 
ment, the public interest will be promoted thereby, to 
employ any of such associations, doing business under this 
act, as depositaries of the public moneys, in any place 
except the city of Washington. 

SEC 33. And be it further enacted, That every person 
who shall mutilate, cut, deface, disfigure, or perforate 
with holes, or shall unite or cement together, or do any 
other thing to any bank bill, draft, note, or other evidence 
of debt issued by any such association, or shall cause or 
procure the same to be done, with intent to render such 
bank bill, draft, note, or other evidence of debt, unfit to be 
reissued by said association, shall upon conviction, forfeit 
fifty dollars to the corporation who shall be injured 
thereby. 



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National Monetary Commission 

Sec. 34. And be it further enacted, That if any person 
shall falsely make, forge, or counterfeit, or cause or 
procure to be made, forged, or counterfeited, or willingly 
aid or assist in falsely making, forging, or counterfeiting 
any note in imitation of, or purporting to be in imitation 
of, the circulating notes issued under the provisions of this 
act, or shall pass, utter, or publish, or attempt to pass, 
utter, or publish, any false, forged, or counterfeited note, 
purporting to be issued by any corporation or association 
doing a banking business under the provisions of this act, 
knowing the same to be falsely made, forged, or counter- 
feited, or shall falsely alter, or cause or procure to be 
falsely altered, or willingly aid or assist in falsely altering 
anv such circulating notes, issued as aforesaid, or shall 
pass, utter, or publish, or attempt to pass, utter, or pub- 
lish as true, any falsely altered or spurious circulating note 
issued, or purporting to have been issued, as aforesaid, 
knowing the same to be falsely altered or spurious, every 
such person shall be deemed and adjudged guilty of felony, 
and being thereof convicted by due course of law, shall be 
sentenced to be imprisoned and kept at hard labor for a 
period not less than three years nor more than ten years, 
and to be fined in a sum not exceeding one thousand 
dollars. 

SEC. 35. And be it further enacted, That if any person 
shall make or engrave, or cause or procure to be made or 
engraved, or shall have in his custody and possession any 
engraved plate or block after the similitude of any plate 
from which any circulating notes issued as aforesaid shall 
have been printed, with intent to use such plate or block, 
or cause or suffer the same to be used, in forging or counter- 



244 



Origin of National Banking System 

feiting any of the notes issued as aforesaid, or shall have in 
his custody or possession any blank note or notes engraved 
and printed after the similitude of any notes issued as 
aforesaid, with intent to use such blanks, or cause or suffer 
the same to be used, in forging or counterfeiting any of the 
notes issued as aforesaid, or shall have in his custody or 
possession any paper adapted to the making of such notes, 
and similar to the paper upon which any such notes shall 
have been issued, with intent to use such paper, or cause 
or suffer the same to be used, in forging or counterfeiting 
any of the notes issued as aforesaid, every such person, 
being thereof convicted by due course of law, shall be 
sentenced to be imprisoned and kept at hard labor for a 
term not less than three nor more than ten years, and 
fined in a sum not exceeding one thousand dollars. 

SEC. 36. And be it further enacted, That suits, actions, 
and proceedings may be had in courts of record of the 
several States and Territories by and against corporations 
and associations under the provisions of this act; and such 
courts shall have concurrent jurisdiction with the circuit 
and district courts of the United States in all such suits, 
actions, and proceedings. 

SEC. 37. And be it further enacted, That it shall be the 
duty of the Comptroller of the Currency to report annually 
to Congress, at the commencement of its session — 

One. A summary of the state and condition of every 
association from whom reports have been received the 
preceding year, at the several dates to which such reports 
refer, with an abstract of the whole amount of banking 
capital returned by them, of the whole amount of their 
debts and liabilities, the amount of circulating notes 



245 



National Monetary Commission 

outstanding, and the total amount of means and resources, 
specifying the amount of specie held by them at the times 
of their several returns, and such other information in 
relation to said associations as, in his judgment, may be 
useful. 

Two. A statement of the associations whose business 
has been closed during the year, with the amount of their 
circulation redeemed, and the amount outstanding. 

Three. To suggest any amendment to the laws relative 
to banking by which the system may be improved, and 
the security of the bill-holders and depositors may be 
increased. 

Fourth. To report the names and compensation of the 
clerks employed by him, and the whole amount of the 
expenses of the banking department during the year; 
such report shall be made by or before the first day of 
December in each year, and the usual number of copies 
for the use of the Senate and House, and two hundred and 
fifty copies for the use of the department, shall be printed 
by the public printer and in readiness for distribution on 
the first meeting of Congress. 

Sec. 38. And be it further enacted, That the right to 
alter, amend, and extend this act and the provisions 
thereof is hereby expressly reserved; but not so as to do 
injustice to those interested and to be affected thereby. 



& 



246 



Lbua'12 



